The De Minimis Indirect Cost Rate (Up to 15% of MTDC) Explained
Note: Some future links on this site may be affiliate links. We never claim hands-on testing; guides are researched from the public sources listed in each article.
How we wrote this: A plain-English summary of 2 CFR 200.414(f) and the MTDC definition in 2 CFR 200.1, checked October 29, 2026. General information, not legal or audit advice; your award terms and agency guidance control.
The rule (2 CFR 200.414(f))
Recipients and subrecipients without a current federally negotiated indirect cost rate (including a provisional rate) may charge a de minimis rate of up to 15 percent of modified total direct costs (MTDC).
Key points from the text:
- You choose the rate, up to 15%.
- Agencies and pass-through entities can't force a lower rate than the one you elected or negotiated, unless a statute or regulation requires it.
- It's optional.
- No documentation is needed to justify it, and you may use it indefinitely.
- Once elected, use it for all federal awards until you choose to get a negotiated rate.
- Charge each cost consistently as direct or indirect, never both.
What counts in MTDC (2 CFR 200.1)
| Included | Excluded |
|---|---|
| Direct salaries and wages, and fringe benefits | Equipment and capital expenditures |
| Materials and supplies | Rental costs |
| Services | Patient care, tuition remission, scholarships and fellowships |
| Travel | Participant support costs |
| The first $50,000 of each subaward | The part of each subaward over $50,000 |
A worked example
Say a project has $200,000 in salaries and fringe, $20,000 in supplies, a $120,000 subaward and $60,000 in equipment.
- MTDC = $200,000 + $20,000 + $50,000 (the first part of the subaward) = $270,000.
- At 15%, indirect costs are up to $40,500.
The figures are illustrative.
Negotiated rates
If you have a negotiated rate, 200.414(c) says federal agencies must accept it, except where a statute or regulation requires otherwise or the agency approves a deviation. Under 200.414(g), a current negotiated rate can get a one-time extension of up to four years, subject to approval.
Your award must state the indirect rate, including whether the de minimis rate applies (2 CFR 200.211(b)(16)).
Related: allowable costs, how to read a NOFO, match.