SBIR Indirect Cost Rate Calculator

How SBIR indirect cost rates work

The three options

Every SBIR Phase I applicant has to choose one of three indirect cost approaches. The right answer depends on whether your small business has ever been audited by a federal cognizant agency (DCAA, ONR, NIH DFAS, etc.).

De minimis (10% of MTDC): Default for first-time applicants with no negotiated rate. Applied to Modified Total Direct Costs (excludes equipment, capital expenditures, the portion of subawards over $25K, and participant support). Most Phase I applicants start here.
Negotiated NICRA (Negotiated Indirect Cost Rate Agreement): If you have an active rate agreement with a federal cognizant agency, use that rate. Typically 20–60% depending on whether it's a fringe-only, overhead, or full F&A rate. Required if you have one on file.
Provisional / proposed rate: For applicants requesting a rate higher than 10% but who don't yet have a NICRA. Requires documentation of your indirect cost pool and base methodology. Subject to audit.

Agency-specific caps (FY 2026)

NIH: Phase I total cap is approximately $314,363 (regular topics) or $419,150 (specially-designated topics). Includes the 7% fee.
NSF: Phase I cap is $314,363 inclusive of the 7% fee. The fee is calculated on total direct + indirect costs, so the cap forces a back-calculation (see below).
DOD / DARPA / Navy / Air Force: Phase I caps vary by component and topic ($100K–$314K). Many DOD programs negotiate the fee separately and the indirect rate ceiling can be capped at 25–35% for first-time awardees.
DOE: Recent (FY 2024+) policy caps SBIR Phase I indirect at 15% for awardees without a negotiated rate. Phase I cap is currently $200K.
USDA NIFA: 10% modified total direct cost ceiling on indirect. Phase I cap is $185K.

The 7% fee back-calculation problem

NSF and several NIH institutes calculate the 7% small business fee on the total of direct + indirect costs. When your total budget must equal exactly $314,363 (the cap), the math runs backwards:

Direct + Indirect + (Direct + Indirect) × 0.07 = $314,363
(Direct + Indirect) × 1.07 = $314,363
Direct + Indirect = $293,797.20
Fee = $20,565.80

The calculator above runs this automatically given your direct cost number and indirect rate, so you don't have to algebra your way to the cap.

Fringe rates: small business vs. university

Small business fringe rates (employer payroll taxes + benefits) typically run 18–35% of direct labor. Universities and research institutions average 30–40%. For STTR proposals, you'll need your subcontractor research institution's fringe rate separately — the small business 40% / research institution 30% cost split rule means the two budgets are computed independently.

Common mistakes to avoid

Applying indirect to total direct (TDC) instead of MTDC: De minimis 10% applies to modified total direct costs. Equipment over $5,000 per item, capital expenditures, tuition remission, and the portion of each subaward over $25,000 are excluded from the base.
Forgetting the fee in the cap math: The $314K cap includes the 7% fee on most NSF and NIH grants. Budget direct + indirect to ~$293,797 and let the fee fill to the cap.
Using a provisional rate above 35% without justification: If you don't have a NICRA, rates above ~25–35% will trigger pre-award audit requirements that can delay your start date by 60–120 days.
STTR cost split errors: STTR requires the small business perform at least 40% of the work and the research institution perform at least 30%. Indirect rates are computed on each entity's piece separately.

Source documents

This tool is a planning aid, not financial or legal advice. Verify all rates and caps with your cognizant federal agency and Authorized Organizational Representative before submission.

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