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Indirect Cost Rate Calculator

Enter your costs to compute your indirect cost rate.

How it is calculated

The rate is a plain ratio: rate % = indirect costs / direct cost base × 100. Indirect costs are the pooled overhead (rent, administration, utilities, IT) for the period, and the direct base is the amount of direct cost you are allocating that overhead against. Both are entered in the same currency and the result is rounded to two decimals; the two amounts are also echoed back with a currency symbol for checking.

The tool does not decide what belongs in the base. If your agreement uses a modified base that leaves out items such as equipment or large subcontracts, subtract those yourself before typing the base. A direct base of zero or less, or negative indirect costs, returns no result. The percentage it produces is a calculated rate from your own figures; a rate you may charge to a funder is set by your agreement, which is not checked here.

Worked example

An organisation has 185000 of pooled overhead for the year and 500000 of direct costs in its allocation base. Divide: 185000 / 500000 = 0.37. Multiply by 100: 37. The tool shows an indirect cost rate of 37.00%. If the agreed base had excluded 150000 of equipment, the base would be 350000 and the same overhead would give 185000 / 350000 = 52.86 %, so the choice of base changes the rate a lot.

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Common mistakes

  • Using total costs (direct plus indirect) as the base. The denominator must be the direct base only, otherwise the rate comes out too low: 185000 / 685000 is 27.01 %, not 37 %.
  • Mixing periods, such as a full year of overhead against six months of direct costs. Both amounts must cover the same period.
  • Putting the rate in as the base or typing 37 instead of the cost amounts. The fields take money amounts, and the percentage is the output.
  • Ignoring base exclusions. If your agreement removes equipment or large subawards from the base, the base you type should already be reduced, as the tool does not do it for you.
  • Leaving direct costs at zero for a project that has not started. The rate is undefined when the base is zero and no result is shown.

Sources

About this calculator

An indirect cost rate allocates overhead — rent, administrative salaries, utilities, IT support — across the projects or grants that actually benefit from it. It's calculated as total indirect costs divided by a direct cost base (often a Modified Total Direct Cost, or MTDC, base), expressed as a percentage.

This rate is central to government grant accounting: US federal awards (NIH, NSF, and other agency grants) are governed by a negotiated indirect cost rate agreement (NICRA) that fixes the rate a recipient can charge. It's used by grant administrators, university research offices, nonprofit finance teams, and government contractors to price proposals and bill overhead correctly under cost-reimbursement contracts.

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Comments (1)

  • Editorial team

    A useful check is to run this twice: once with your actual overhead and actual base, and once with the figures behind your agreed rate. If the first result comes out higher than the rate you are allowed to charge, the gap is overhead you cannot recover from the funder, which matters when you budget a new proposal. Keep both figures on the same fiscal period. Which base does your agreement use, and which others would you want to compare?

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