2 CFR 200.439 sets 4 requirements for organizations that receive federal grants and cooperative agreements. Applies when you build your application and budget, and to every cost you charge after award.
Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs only with the prior written approval of the Federal agency or pass-through entity.
Budget requests general purpose equipment (e.g., office/general-use IT equipment, vehicles), buildings, or land
Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity.
Special purpose equipment items with a unit cost of $10,000 or more
Capital improvements that materially increase the value or useful life of land, buildings, or equipment are allowable as direct costs only with prior written approval; approved capital expenditures must be charged in the period the expenditure is incurred (or as otherwise negotiated with the agency); the unamortized portion of equipment written off due to a change in capitalization levels may be recovered via continued depreciation or negotiated amortization; and agency-instructed disposal or transfer costs are allowable.
Budget includes renovation, upgrade, or improvement lines, or equipment disposal/transfer costs
Equipment and other capital expenditures are unallowable as indirect costs; capital assets are recovered through depreciation under § 200.436 instead.
Capital items included in an indirect cost pool or recovered through the indirect rate
Upload the funding notice and your draft budget or narrative, and ask. Grantable answers from its compliance database of federal, agency and state rules, with citations.
(a) See § 200.1 for the definitions of capital expenditures, equipment, special purpose equipment, general purpose equipment, acquisition cost, and capital assets.
(b) The following rules of allowability must apply to equipment and other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs, but only with the prior written approval of the Federal agency or pass-through entity.
(2) Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity.
(3) Capital expenditures for improvements to land, buildings, or equipment that materially increase their value or useful life are allowable as a direct cost, but only with the prior written approval of the Federal agency or pass-through entity. See § 200.436 on the allowability of depreciation on buildings, capital improvements, and equipment. See § 200.465 on the allowability of real property and equipment rental costs.
(4) When approved as a direct cost in accordance with paragraphs (b)(1) through (3), capital expenditures must be charged in the period in which the expenditure is incurred or as otherwise determined appropriate and negotiated with the Federal agency.
(5) The recipient or subrecipient may claim the unamortized portion of any equipment written off as a result of a change in capitalization levels by continuing to claim the otherwise allowable depreciation on the equipment or by amortizing the amount to be written off over a period of years negotiated with the cognizant agency for indirect cost.
(6) Cost of equipment disposal. If the Federal agency instructs the recipient or subrecipient to otherwise dispose of or transfer the equipment, the costs of disposal or transfer are allowable.
(7) Equipment and other capital expenditures are unallowable as indirect costs. See § 200.436.
Source: eCFR · checked Sep 17, 2026
Capital expenditures for general purpose equipment, buildings, and land are allowable as direct costs only with the prior written approval of the Federal agency or pass-through entity. Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $10,000 or more have the prior written approval of the Federal agency or pass-through entity. Capital improvements that materially increase the value or useful life of land, buildings, or equipment are allowable as direct costs only with prior written approval; approved capital expenditures must be charged in the period the expenditure is incurred (or as otherwise negotiated with the agency); the unamortized portion of equipment written off due to a change in capitalization levels may be recovered via continued depreciation or negotiated amortization; and agency-instructed disposal or transfer costs are allowable. Equipment and other capital expenditures are unallowable as indirect costs; capital assets are recovered through depreciation under § 200.436 instead.
Budget requests general purpose equipment (e.g., office/general-use IT equipment, vehicles), buildings, or land. Special purpose equipment items with a unit cost of $10,000 or more. Budget includes renovation, upgrade, or improvement lines, or equipment disposal/transfer costs. Capital items included in an indirect cost pool or recovered through the indirect rate.
Plain-English summaries for information only, not legal advice. Always check the regulation text, your award terms and your agency’s guidance.