Indirect Cost Rate De Minimis: 15% Election in 4 Steps

By Aoba Works · Published October 21, 2026 · 17 min read

How this guide was made: drafted with AI assistance from the official sources linked below, then passed an automated editorial check before publishing. Our process

• 2 Cfr 200
• Federal Grants

The de minimis indirect cost rate is now up to 15% of Modified Total Direct Costs (MTDC). It used to be 10%. If your organization has no current federally negotiated indirect cost rate, 2 CFR 200.414(f) lets you elect it without negotiating with anyone (2 CFR 200.414, Cornell LII). The 15% figure applies to awards issued on or after October 1, 2024. You make the election by putting the rate, the MTDC base and a short statement in your budget, and then using the same rate on all of your federal awards (NSF; Clark Nuber).

Which option is right for you?

The table below shows the best first choice for each common situation.

What Is the De Minimis Indirect Cost Rate? (Meaning & Definition)

The de minimis indirect cost rate is a flat rate of up to 15% of MTDC. Organizations without a current negotiated rate can charge it in place of documented overhead. The regulation says recipients and subrecipients "that do not have a current Federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15 percent of modified total direct costs (MTDC)" (2 CFR 200.414(f)).

You need three terms to read that sentence.

Indirect costs are shared costs you can't tie to one project without a lot of effort. Examples include the executive director's time, accounting, rent for the main office, insurance and IT.

MTDC is the base you multiply the rate by. According to 2 CFR 200.1, it covers "all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward." It excludes "equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000."

Equipment is tangible property with a useful life of more than one year. Its per-unit cost must meet or exceed the lower of two amounts: your own capitalization threshold or $10,000 (2 CFR 200.1). A $1,400 laptop is a supply and stays in MTDC. A $12,000 instrument is equipment and comes out.

The words "up to" are easy to miss. You can choose 15%, or you can pick a lower number such as 12%. A federal agency can't force you below 15% unless a statute requires it (2 CFR 200.414(f)). The regulation also says you don't need documentation to justify using the rate, and you can use it indefinitely (Clark Nuber).

Pitfall: Many blog posts and older agency form instructions still describe the rate as "10% of MTDC" with a "$25,000" subaward limit. Those numbers come from the pre-October 2024 rule. If you copy them, you'll under-recover indirect costs on new awards.

Federal Indirect Cost Rate De Minimis: Who Can Elect It and When

Any recipient or subrecipient without a current federal negotiated rate, including a provisional rate, can elect the federal de minimis rate. You elect it when you build the application budget. Under the old rule only organizations that had never had a negotiated rate qualified. The 2024 revision changed that test to having no current rate, so an organization whose NICRA has expired can now use de minimis (NSF; Clark Nuber).

Who qualifies

• Nonprofits, institutions of higher education, and state, local and tribal governments without a current NICRA. Part 200 applies to these "non-federal entities" by default.
• Subrecipients. The text of 200.414(f) names subrecipients alongside recipients. A pass-through entity, such as a state agency passing federal money to you, follows the same rule.
• For-profit organizations, only if the agency applies Part 200 to them. Section 200.101 says agencies "may apply subparts A through E of this part to... for-profit organizations... as permitted in agency regulations or program statutes" (2 CFR 200.101). For small businesses this means the NOFO is the deciding document. Our small business grant application guide explains how to find the cost principles that apply to your award.

Who does not qualify

You can't elect de minimis while you hold a current negotiated rate, provisional or final. In Clark Nuber's words, "A Negotiated Indirect Cost Rate Agreement (NICRA) must expire before using the De Minimis rate" (Clark Nuber). Some programs also cap or ban indirect costs by statute. When that happens, the NOFO's "Funding Restrictions" or budget section will say so, and the statute overrides 15%.

When the 15% rate applies

According to NSF's guidance, new awards executed on or after October 1, 2024 may elect the 15% rate. Existing awards may apply it to costs incurred after October 1, 2024, but not retroactively (NSF). Clark Nuber points out that a pre-existing award moves to 15% only if it's formally amended after that date (Clark Nuber). If you hold a 2023 award at 10%, ask your grants officer about an amendment. Don't change the rate on your own.

How to Calculate the De Minimis Indirect Cost Rate

To calculate it, add up your MTDC (allowed direct costs plus the first $50,000 of each subaward) and multiply by your elected rate, up to 15%. All the work is in building the base correctly (2 CFR 200.1).

Steps

1. List every direct cost line in your draft budget.
2. Tag each line In MTDC or Excluded using the 200.1 definition.
3. For each subaward, put the first $50,000 in MTDC and exclude the rest. The limit is per subaward, not per year.
4. Add up the "In MTDC" lines. That total is your base.
5. Multiply the base by your rate (0.15, or lower if you choose).
6. Add the indirect amount to total direct costs to get the total request. Check it against the NOFO's award ceiling.

Worked example (sample numbers, for illustration only)

Here is a one-year budget for a hypothetical community health nonprofit:

At 15%, indirect costs are $220,000 × 0.15 = $33,000, so the total request is $320,000. If the NOFO ceiling were $310,000, one option is to elect a lower rate. At 10.5% the indirect amount is $23,100, which brings the total to $310,100, so you'd still need to trim $100 of direct costs. The other option is to cut direct costs and keep 15%. Either is allowed because the rule says "up to."

A common mistake is to apply 15% to total direct costs. In this example that gives $43,050, which is $10,050 more than allowed, and it's the most common reason indirect lines get cut in budget review. To fix it, keep the "In MTDC?" column in your budget spreadsheet and put the indirect formula on the MTDC subtotal cell, not the grand total.

How to Elect the De Minimis Rate: The 2 CFR 200.414(f) Process in 4 Steps

Electing the rate takes four actions: confirm you're eligible, state the election in your budget forms and narrative, use it consistently, and keep your MTDC workpapers. None of these involves filing a request with an agency. The election is the statement in your application.

Step 1: Confirm eligibility and check the NOFO

1. Check whether your organization holds a current NICRA, including a provisional rate. Look in your finance files and ask your auditor. If you do, stop here and use that rate.
2. Open the NOFO and search for "indirect," "de minimis," and "MTDC."
3. Look for program-level caps. A statutory cap of, say, 8% overrides 15%.
4. For for-profit applicants, confirm the NOFO applies 2 CFR 200 Subpart E (2 CFR 200.101).

If you're not sure whether an opportunity is a grant or a cooperative agreement, it makes no difference here. Both fall under Part 200 (our comparison).

Step 2: Enter the election in the budget forms

The labels depend on which budget form the NOFO requires.

SF-424A (Budget Information – Non-Construction Programs):

1. Section B – Budget Categories, line 6j "Indirect Charges": enter the indirect dollar amount ($33,000 in the example).
2. Section F – Other Budget Information, line 22 "Indirect Charges": the official instructions ask for "the type of indirect rate (provisional, predetermined, final or fixed) that will be in effect during the funding period, the estimated amount of the base to which the rate is applied, and the total indirect expense" (Grants.gov SF-424A instructions). For example: "De minimis rate, 15% of MTDC per 2 CFR 200.414(f); base $220,000; indirect $33,000."

R&R Budget (common for NSF, NIH and other research funders): the indirect cost section has fields for Indirect Cost Type (enter "Modified Total Direct Costs"), the rate, Indirect Cost Base, funds requested, and Cognizant Federal Agency (Grants.gov R&R Budget form). If you have no cognizant agency because you've never negotiated, write "None – de minimis rate elected," unless the NOFO tells you otherwise.

For the rest of the SF-424 package, see our field-by-field SF-424 instructions.

Step 3: Write the election statement in the budget narrative

Agencies expect a plain statement. NEH, for example, says your budget "must include the base, rate, and amount of indirect costs" (NEH). Agency instructions found in search results also ask applicants to state in the Budget Narrative that they don't have a NICRA and are electing the de minimis rate.

Sample wording (an example, not official language):

"[Organization] does not have a current federally negotiated indirect cost rate agreement and elects the de minimis rate of 15% of modified total direct costs under 2 CFR 200.414(f). The MTDC base of $220,000 excludes equipment ($15,000), participant support costs ($10,000), rental costs ($12,000), and the portion of the subaward to [Partner] in excess of $50,000 ($30,000). Indirect costs requested: $33,000."

Listing the exclusions takes a few extra lines. It also answers the reviewer's first question before they ask it. For help with the rest of the narrative, see how to write federal grant proposals for nonprofits.

Step 4: Apply it consistently and keep the file

1. Use one rate on every federal award. NSF says the rate "must be applied consistently across all an organization's federal awards until the organization chooses to negotiate an indirect cost rate" (NSF).
2. Don't double-charge. If rent sits in your indirect pool, you can't also charge rent directly to the grant. The regulation requires costs to be "consistently charged as direct and indirect costs and not double charged or inconsistently charged as both" (Clark Nuber quoting 200.414(f)).
3. Keep these items in an "Indirect – De Minimis" folder: the budget spreadsheet with the MTDC column, the narrative statement, the award notice showing the approved rate, and a one-page written policy listing which cost types you treat as indirect.
4. Recalculate when you draw funds. Indirect costs are claimed on actual MTDC spent, not the budgeted amount. If you spend only $180,000 of MTDC, you can claim $27,000 at 15%.

You don't have to justify the rate with documentation. You still have to show the base was calculated correctly, and auditors test that. It's a different question from whether you were entitled to 15%.

Indirect Cost Rate vs. De Minimis: What's the Difference?

A negotiated indirect cost rate (NICRA) is calculated from your actual costs and approved by your cognizant federal agency. The de minimis rate is a self-elected flat rate of up to 15% of MTDC with no negotiation. Section 200.414(c) requires federal agencies to accept negotiated rates unless a statute, regulation or documented agency approval allows a deviation (2 CFR 200.414).

How to decide

Work out your actual indirect costs divided by your MTDC from last year's audited financials. If the result is well above 15%, for example 24%, and you expect several federal awards, a negotiated rate is probably worth the effort. If it's near or below 15%, or you have one small award, de minimis is the simpler choice. The DOL guide to indirect cost rate determination shows how the calculation is set up.

Pitfall: Don't mix the two approaches. You can't use de minimis on one award and a negotiated rate on another during the same period (search summary of agency guidance).

De Minimis Indirect Cost Rate Under Uniform Guidance: Key Rules

Under the Uniform Guidance (2 CFR Part 200, Subpart E), de minimis is a simpler alternative to negotiation with five firm rules. These are the ones most likely to come up in an audit.

1. Ceiling of 15% of MTDC, with any lower rate allowed (200.414(f)).
2. Agencies can't require a lower rate unless a statute says so (same section). If a program officer asks you to cut to 10% without citing a statute, ask which authority they're relying on.
3. The MTDC exclusions are fixed. Other items may be excluded "only... when necessary to avoid a serious inequity... and with the approval of the cognizant agency for indirect costs" (200.1). You can't create your own exclusions.
4. Classify costs consistently. The same type of cost can't be direct on one award and indirect on another.
5. No end date. Once elected, you keep the rate until you negotiate one.

The rule applies to subrecipients as well. If you pass money to a partner without a NICRA, they can elect de minimis on their subaward. Your own MTDC still counts only the first $50,000 of that subaward.

Pitfall: inconsistent agency pages. NEH's guidance page lists the 15% rate but, as of October 2026, still describes MTDC with "up to the first $25,000 of each subaward" (NEH). Some agency SF-424A instructions also still mention 10% and $25,000 (Grants.gov search results for SF-424A instructions). The fix is to follow the current regulation ($50,000) for awards made on or after October 1, 2024. If your NOFO says something different, email the grants management contact named in the NOFO and keep the reply.

Is There a 15% De Minimis Indirect Cost Rate?

Yes. Under the current 2 CFR 200.414(f), the de minimis rate is up to 15% of MTDC. Confusion comes from a different "15%" policy at NIH that no longer applies.

On February 7, 2025, NIH issued NOT-OD-25-068. It tried to cap indirect cost rates at 15% on NIH research grants, including organizations that held negotiated rates (Clearinghouse case record). That was a cap on everyone's rate, not the de minimis election. A federal court blocked it. On January 5, 2026, the First Circuit affirmed that the cap violated the appropriations rider and HHS regulations (Higher Ed Dive; Forbes). According to the American Council on Education, the administration did not seek Supreme Court review and the litigation is over (ACE).

So when you see "15%":

De Minimis Indirect Cost Rate in 2024, 2025, and 2026: Has It Changed?

Yes, it changed once. The 2024 Uniform Guidance revision raised the rate from 10% to 15% and the MTDC subaward limit from $25,000 to $50,000, effective October 1, 2024. Nothing in 2025 or 2026 has changed it as of October 2026 (NSF; Clark Nuber).

On May 29, 2026, OMB published a proposed rewrite of 2 CFR Part 200, Federal Register document 2026-10817 under docket OMB-2026-0034. Comments closed on July 13, 2026, and the target effective date was October 1, 2026 (CASRAI). Law-firm summaries report that the proposal leaves the 15% de minimis rate and the NICRA framework unchanged, even though Executive Order 14332 had directed OMB to address indirect costs (search summary of Venable/Jenner analyses; Jenner & Block). Commentary has also flagged a proposed "lower indirect rate preference" in § 200.205(b), which could affect how applications with lower rates are scored (NeedICR).

Before you submit in late 2026, open 2 CFR 200.414 on eCFR and check the "up to date as of" banner. Also check the Federal Register for a final rule. The most recent status reports found for this guide said no final rule had been published (CASRAI). Until one takes effect, the current text governs.

Next steps

You can finish most of this today with your draft budget open.

Do it yourself today:

1. Add an "In MTDC?" column to your budget spreadsheet. Tag each line using the 200.1 exclusions and put the indirect formula on the MTDC subtotal.
2. Paste the sample election statement from Step 3 into your budget narrative, replacing the example numbers with yours.
3. Write a one-page indirect cost policy listing which cost types are indirect, and file it with your budget workpapers.

If you'd rather not do it yourself: a CPA firm that audits nonprofits under the Single Audit, or an indirect cost consultant, can build your MTDC base. They can also tell you whether a negotiated rate would recover more. This suits organizations with several federal awards or overhead well above 15%, because a negotiated rate may justify the fee. It's usually poor value for a single small award, where de minimis already works. These firms don't publish standard fees, so prices vary by firm and scope (as of October 2026; ask for a written quote). One limitation is that a consultant can't approve a rate. Only your cognizant federal agency can. The free option is the DOL indirect cost rate guide. It's useful for preparing a negotiated rate proposal, though it doesn't cover agency-specific NOFO rules.

Related guides on Outlay Grants:

• SF-424 Instructions: Field-by-Field Table and Steps (2026)
• How to Write Grants for Nonprofits: Federal Proposal Guide
• Grants.gov vs SAM.gov: Registration Order in 4 Steps (2026)
• How to Check SAM.gov Registration Status (Step by Step)

FAQ

What is the current de minimis indirect cost rate?

As of October 2026 it's up to 15% of modified total direct costs under 2 CFR 200.414(f). It applies to awards made on or after October 1, 2024. OMB's 2026 proposed rewrite of Part 200 would leave it unchanged, but check eCFR for a final rule before you submit.

What is the 10% de minimis indirect cost rate?

It's the earlier version of the rule, in effect from 2014 until September 30, 2024. Only organizations that had never had a negotiated rate could use it, and MTDC included just the first $25,000 of each subaward. Older awards keep 10% unless they're amended.

What is the de minimis indirect cost rate under 2 CFR 200?

Section 200.414(f) lets recipients and subrecipients without a current negotiated rate charge up to 15% of MTDC, as defined in 200.1. You don't need documentation to justify the rate. You do have to use it consistently on all federal awards and never charge the same cost both directly and indirectly.

De minimis indirect rate: can I switch to a negotiated rate later?

Yes. The de minimis rate lasts until you choose to negotiate. To switch, you submit an indirect cost proposal to your cognizant federal agency, and once a rate is approved it replaces de minimis on your awards. Under the current rule you can also go back to de minimis after a NICRA expires.

Sources

• 2 CFR 200.414 – Indirect costs (Cornell LII)
• 2 CFR 200.1 – Definitions (Cornell LII)
• 2 CFR 200.101 – Applicability (Cornell LII)
• NSF – Indirect Costs
• NEH – General Guidance on Calculating Indirect Costs
• Grants.gov – SF-424A Instructions
• Grants.gov – R&R Budget form (read-only)
• U.S. Fish and Wildlife Service – SF-424A Instructions (2023)
• U.S. Department of Labor – A Guide for Indirect Cost Rate Determination
• Clark Nuber – Uniform Guidance: The De Minimis Indirect Cost Rate (Updated)
• GrantCue – Indirect Cost Rate for Federal Grants
• CASRAI – OMB 2 CFR 200 Rewrite: Current Status
• Venable – The Administration's Proposed Revisions to the Uniform Guidance
• Jenner & Block – OMB Proposes Major Overhaul of Federal Grant Rules
• NeedICR – OMB's Proposed "Lower Indirect Rate Preference"
• Clearinghouse – Massachusetts v. NIH
• Higher Ed Dive – NIH cap on indirect research costs struck down on appeal
• Forbes – Appeals Court Upholds Ban Against NIH Indirect Cost Cap
• American Council on Education – Indirect Costs Cap Litigation Concluded

Spotted something out of date or wrong? Tell us at shigoto.ai.note@gmail.com. Guides are re-checked against official sources on a rolling schedule.