Modified total direct costs (MTDC): what is in the base
Grantable compliance team · Figures checked against the eCFR text on October 4, 2026
Modified total direct costs (MTDC) are the direct costs an indirect cost rate is applied to: salaries and wages, fringe benefits, materials and supplies, services, travel, and up to the first $50,000 of each subaward. They exclude equipment, capital expenditures, patient care, rent, tuition remission, scholarships and fellowships, participant support costs, and each subaward above $50,000 (2 CFR 200.1).
- Subaward included
- First $50,000 of each (was $25,000) · 200.1
- Used by
- The de minimis rate, and most negotiated rates · 200.414
- Excluded
- Equipment, participant support, rent, tuition… · 200.1
What MTDC includes and excludes
From the definition in § 200.1:
| Included | Excluded |
|---|---|
| Direct salaries and wages | Equipment and capital expenditures |
| Applicable fringe benefits | Charges for patient care |
| Materials and supplies | Rental costs |
| Services | Tuition remission |
| Travel | Scholarships and fellowships |
| Up to the first $50,000 of each subaward | Participant support costs, and each subaward above $50,000 |
A worked example
A $250,000 direct budget. Equipment and participant support come out of the base, and only the first $50,000 of the $60,000 subaward counts, so MTDC is $200,000. At the 15% de minimis rate that gives $30,000 of indirect costs.
| Budget line | Direct cost | In MTDC? |
|---|---|---|
| Salaries and wages | $100,000 | Yes: $100,000 |
| Fringe benefits | $30,000 | Yes: $30,000 |
| Travel | $10,000 | Yes: $10,000 |
| Materials and supplies | $10,000 | Yes: $10,000 |
| Equipment (one $25,000 instrument) | $25,000 | No |
| Participant support costs | $15,000 | No |
| Subaward to a partner | $60,000 | First $50,000 only |
| Total | $250,000 | MTDC = $200,000 |
Details that trip people up
- The $50,000 applies to each subaward, regardless of the subaward’s period of performance, not to each year of it.
- Contracts are not subawards. Payments to a contractor (see § 200.331) stay in the base in full as services.
- Your negotiated rate agreement names its own base. Many use MTDC, but some use salaries and wages or total direct costs. Use the base your agreement states.
- Other exclusions are allowed only to avoid a serious inequity and only with your cognizant agency’s approval.
Ask how this applies to your award
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The regulation, section by section
- 2 CFR 200.1 Definitions
- 2 CFR 200.414 Indirect costs
- 2 CFR 200.331 Subrecipient and contractor determinations
Questions
Does MTDC include subawards?
Only the first $50,000 of each subaward, under the 2024 definition in 2 CFR 200.1. The rest of each subaward is excluded. It was $25,000 before October 1, 2024.
Is equipment included in MTDC?
No. Equipment and capital expenditures are excluded. Supplies under the equipment threshold (the lesser of your capitalization level or $10,000 per unit) are included.
Are participant support costs part of MTDC?
No. Participant support costs, such as stipends, travel and registration fees paid for participants, are excluded from MTDC.
Sources
How we check: every figure on this page is compared with the current eCFR text and re-checked when the regulation changes. Last checked October 4, 2026. Plain-English summaries for information only, not legal advice. Always check the regulation text, your award terms and your agency’s guidance.