If you run a grant budget and you are still applying a 10% overhead figure, you are leaving money on the table. The indirect cost rate you can claim went up in 2024, and the change was big enough to move tens of thousands of dollars on a single award. Most applicants never adjusted, partly because the news got buried under a louder, separate fight over agency-imposed caps that courts have since struck down.

What the 2024 Rules Quietly Changed About Recovery

On April 4, 2024, the Office of Management and Budget finalized a rewrite of the federal grant rulebook, 2 CFR Part 200. The headline number for small and mid-size grantees: the de minimis indirect cost rate climbed from 10% to 15% of MTDC. Any recipient or subrecipient that has never held a negotiated rate may elect up to 15%, set the rate themselves anywhere up to that ceiling, and use it indefinitely without justifying it. That language lives in 2 CFR 200.414, and it took effect for awards made on or after October 1, 2024.

The second change is less famous but often worth more. The definition of modified total direct costs in 2 CFR 200.1 now counts the first $50,000 of each subaward toward the base, up from $25,000. A bigger base multiplied by a bigger rate compounds. The EPA’s plain-language summary of the revision walks through both shifts in its overview of the 2024 changes to 2 CFR Part 200, and federal funders have been issuing their own implementation notices to match, such as NIH’s NOT-OD-25-059.

De Minimis vs. Negotiated: Which Rate Actually Pays More

Two doors lead to overhead recovery. The de minimis rate is the no-paperwork option: elect up to 15%, apply it to MTDC, and move on. A Negotiated Indirect Cost Rate Agreement (NICRA) is the custom option: you build an indirect cost proposal, your cognizant federal agency reviews it, and the approved rate binds every other federal funder. Negotiated rates commonly land anywhere from the high teens to well above 50% for research universities, so a NICRA can dwarf 15%, but it costs time and accounting muscle to earn.

The practical rule is about scale. If your overhead genuinely runs above 15% of MTDC and you have the financial systems to document it, a negotiation usually wins. If you are a lean nonprofit or an early-stage company chasing your first federal dollars, the de minimis rate captures most of the benefit with none of the delay. Before you commit either way, it helps to see how much you actually spend chasing the kinds of awards in OpenGrants’ federal grants hub, because the right answer depends on your real cost structure, not a rule of thumb.

The split in practice is roughly even. Industry estimates put about 40% of nonprofits on the de minimis rate, with the rest negotiating, and negotiated rates frequently run from the high teens to the mid-60s depending on organization type. That spread tells you why a blanket recommendation fails: a research institute recovering 55% would be foolish to elect 15%, while a three-person nonprofit that bills almost everything as direct cost would burn months chasing a negotiation that nets little more than the de minimis rate already offers. The decision is arithmetic, and you cannot do it without first calculating your real MTDC base.

A Worked MTDC Calculation

Say your project has $400,000 in total direct costs: $250,000 in salaries and fringe, $20,000 in supplies, $15,000 in travel, $40,000 in equipment, and one $75,000 subaward. Equipment is excluded from MTDC entirely. Only the first $50,000 of the subaward counts. So your MTDC base is $250,000 + $20,000 + $15,000 + $50,000 = $335,000. At the new 15% de minimis rate, you recover $50,250.

Run the same budget under the old rules and the gap is stark. The old subaward threshold of $25,000 would have set the base at $310,000, and the old 10% rate would have returned just $31,000. Same project, same costs, but the 2024 changes move recovery from $31,000 to $50,250 — an extra $19,250, or roughly 62% more overhead on one award. Multiply that across a portfolio and the case for updating your budget template writes itself.

Notice which line did the heavy lifting. Lifting the rate from 10% to 15% accounts for most of the increase, but the subaward change matters more the more you partner. An organization that re-grants or subcontracts a large share of every award sees the base swell as each subaward now contributes $50,000 instead of $25,000 to MTDC. Coalitions, intermediaries, and lead applicants on multi-partner projects should rebuild their templates first, because that is where the compounding is largest. A single-entity project with no subawards gains only from the rate change; a hub-and-spoke project gains from both, and the difference can run well into five figures on a mid-size award.

The 15% Cap Fight That Doesn’t Touch Your De Minimis Rate

Here is where applicants get confused. Starting in early 2025, several agencies tried to force a flat 15% ceiling on indirect costs for their largest research grantees. The National Institutes of Health moved first, and the National Science Foundation, the Department of Energy, and the Department of Defense followed with their own caps. Universities sued, and the caps lost. A federal judge struck down the NSF policy as “arbitrary and capricious,” and the courts blocked the NIH version too.

The blocks held on appeal. In January 2026 the First Circuit unanimously upheld the order against the NIH cap, finding the agency had violated statute and its own rulemaking procedures, and the administration later abandoned a Supreme Court challenge. Agencies have begun unwinding the policies on their own: the Department of Energy rescinded its cap through Policy Flash PF-2026-30 on January 27, 2026, restoring reliance on negotiated and de minimis rates. The Congressional Research Service tracks the saga in its briefing on NIH indirect cost policy.

The key point for everyone outside the research-university world: those caps targeted negotiated rates on large institutional awards. They never amended 2 CFR 200.414, and they do not lower the 15% de minimis ceiling you elect. If you are using the de minimis rate, the cap fight is a spectator sport.

What Pass-Through Entities Can and Can’t Make You Accept

Many grantees never touch a federal agency directly — they receive funds as a subrecipient through a state, a city, or a larger nonprofit. A common abuse is the pass-through that tells subrecipients they will get “no indirect” or some token rate like 5%. The 2024 rules closed that loophole. A pass-through entity may not require you to accept a de minimis rate lower than 15% (or lower than your negotiated rate) unless a federal statute or regulation says otherwise.

That protection is worth knowing in writing, because it changes negotiations. If a county subaward offer zeroes out your overhead, you can point to 2 CFR 200.414 and ask for the de minimis rate you are entitled to elect. Subrecipients pursuing state and local pass-through dollars — the kind catalogued in OpenGrants’ small business grants and nonprofit grants resources — leave real money behind by assuming overhead is non-negotiable. It often is not.

One caveat keeps this from being automatic. A pass-through can still require a lower rate when a federal statute or program rule caps indirect costs — some block grants and training programs carry their own statutory limits. Read the funding announcement and the federal program statute, not just the subaward offer letter. If neither caps overhead, the floor in 2 CFR 200.414 is yours, and a polite citation in writing is usually enough to recover the rate a pass-through tried to skip.

How to Claim the Higher Rate Without a Negotiation

Electing the de minimis rate is mostly a budgeting and bookkeeping exercise. First, rebuild your budget template so the indirect line is 15% of a correctly calculated MTDC base — strip out equipment, capital costs, participant support, tuition, and the portion of any subaward above $50,000 before you apply the rate. Second, state the election plainly in your budget narrative so reviewers and auditors see a deliberate choice. Third, apply the rate consistently: once you elect de minimis, you use it across all your federal awards until you decide to pursue a negotiated rate.

Keep your accounting clean enough to survive a single audit question, even though the de minimis rate requires no rate documentation. If you are weighing whether to graduate to a negotiation, that is exactly the kind of judgment call where a budget review pays for itself; OpenGrants’ managed grant writing team and the funding-discovery tools in the grant database can help you model both paths before you lock a number into a proposal. More tactical budgeting walkthroughs live on the grant writing blog.

Frequently Asked Questions

Is the de minimis indirect cost rate automatically 15% now?

No. The 15% figure is a ceiling, not a default. You elect a rate up to 15% of MTDC and you may choose less. What changed in 2024 is that the maximum rose from 10% to 15% for awards issued on or after October 1, 2024. You still have to write the rate into your budget; nothing applies it for you.

Can I switch from de minimis to a negotiated rate later?

Yes. The de minimis rate can be used indefinitely, but you are free to pursue a NICRA whenever your overhead and accounting systems justify it. Once a negotiated rate is approved by your cognizant agency, every federal funder must honor it. The trade-off is time — negotiations can take many months to finalize and the agreement typically runs for several years.

Does the $50,000 subaward threshold apply to my de minimis budget?

Yes for the de minimis rate, because MTDC is defined the same way regardless of which rate you use. If you hold a NICRA, you generally need an agreement that cites the updated $50,000 threshold before you can apply it, so check your current rate agreement language.

Did the agency 15% caps lower the de minimis rate?

No. The 2025-26 caps targeted negotiated rates on large research awards and were blocked in court. They never amended 2 CFR 200.414 and have no effect on the 15% de minimis ceiling that smaller grantees and subrecipients elect.

Bottom Line and Next Steps

The most expensive mistake in grant budgeting right now is inertia: copying last year’s 10% overhead line into this year’s proposal. The rules moved, and the indirect cost rate you are entitled to claim moved with them. For most lean organizations, the single highest-return action this quarter is to rebuild one budget template around a 15% de minimis rate on a correctly scoped MTDC base, then check whether the new $50,000 subaward threshold lifts the base further.

If your true overhead clears 15% and you can document it, start a NICRA instead — but do that as a deliberate choice, not because you assumed 10% was still the number. Either way, model the dollars before you submit. If you want a second set of eyes on the budget math or help deciding between de minimis and a negotiated rate, OpenGrants’ grant writing services can pressure-test the recovery on your next application so you stop leaving overhead on the table.