How to Write a Grant Budget (Line-by-Line Guide)

Important: NIH budgets follow different indirect-cost numbers. NIH keeps applying 45 CFR 75 to indirect costs (NOT-OD-26-072 (opens in a new tab)), so an NIH applicant without a negotiated rate uses a de minimis rate of 10% of MTDC, not 15% (NIH Grants Policy Statement 7.4 (opens in a new tab)), and counts only the first $25,000 of each subaward in MTDC, not $50,000. The rest of this guide uses the 2 CFR 200 numbers other agencies follow.

Learning how to write a grant budget is one of the first skills every grant writer needs and one of the hardest to master. The numbers in your budget aren't just financial projections. They're a direct reflection of your program design, and reviewers read them that way. A budget that doesn't align with your project narrative tells reviewers you haven't thought through implementation. A budget with unexplained costs or missing categories tells grants management staff you don't understand federal requirements. This page focuses specifically on the budget; for the complete proposal from narrative to submission, see our guide to writing a grant proposal.

The honest reality is that most grant budget errors are not calculation errors. They're categorization errors, and the difference matters enormously during a monitoring visit or audit. If you're primarily focused on NIH applications, the NIH grants complete guide covers modular versus detailed budgets, salary cap rules, and the specific cost principles NIH enforces. Common budget mistakes are consistent across agencies, and most of them come from not understanding what each budget category requires.

Our analysis is that a grant budget should be reviewed as a work plan in dollars, not as a spreadsheet exercise. For example, one nonprofit can have perfect math and still lose points if the personnel effort cannot deliver the promised services, while another applicant can win with a leaner budget because every cost ties clearly to a task, output, and allowable cost rule.

If you're building an NIH budget for a cooperative agreement or an institutional award, compare your assumptions against the federal grant database before you lock the line items. U01, K12, D43, and other NIH mechanisms handle subawards, trainee support, travel, and international costs differently enough that a generic NIH budget checklist is not enough.

This guide covers every standard budget category with formulas, explains the OMB cost principles that govern federal spending, walks through a detailed sample budget, and flags the most common errors that trigger negotiation or rejection.

According to 2 CFR Part 200, federal costs must be allowable, allocable, reasonable, and consistently treated. According to Grants.gov, many discretionary applications use the SF-424A budget form or agency-specific budget forms tied to the same cost categories. According to NIH, applicants must follow salary cap, modular budget, and detailed budget rules when those instructions apply. According to NSF, proposal budgets must match the work proposed and follow the current Proposal and Award Policies and Procedures Guide.

According to CMS budget narrative guidance, applicants must break out federal and non-federal costs by SF-424A object-class categories, and a 5-year NOFO may require a second SF-424A attachment for the later budget years. According to 2 CFR 200.414, organizations without a negotiated indirect cost rate can use a de minimis rate of up to 15% when the rule applies and the NOFO does not impose a different limit; NIH awards use 10%.

What official budget pages don't tell you is where reviewers lose trust before they find a math error. Grantsights analysis compares 2 CFR Part 200 cost tests, SF-424A object classes, agency budget narrative samples, and indirect-cost rules before recommending an apply, revise, or skip decision. Apply when every personnel, fringe, travel, equipment, supplies, contractual, other, and indirect-cost line traces to a work plan task. Revise when the budget is correct but the narrative cannot prove why the cost is needed. Skip when the NOFO cap, match rule, or indirect-cost limit makes the project underfunded from day one.

For example, our review found that a 15% de minimis indirect-cost line can be right under 2 CFR 200.414 and still be wrong for a specific NOFO if the agency sets a lower cap, or if the funder is NIH, which uses 10%. The bad fit is a spreadsheet built after the narrative is finished. The stronger route is a budget narrative that tells a reviewer which dollars buy which deliverables, which costs are federally allowable, and which costs the applicant will cover outside the award.

Budget Rules to Check Before You Draft

Budget Trust Screen: Every Dollar Needs a Job

Official budget rules define cost categories, but reviewers judge whether the dollars make the project believable. Grantsights' budget trust screen:

The Grantsights rule is to write the budget before the final narrative. If a line item cannot be tied to a task, output, cost rule, and evidence source, it should be revised before the application is submitted.

Where to go next: use budget justification for the narrative, federal budget revisions before moving money after award, allowable costs for cost tests, grant proposal guide for full application structure, and the free grant database when the budget needs a check against typical award sizes.

---

The Foundation: OMB Cost Principles (2 CFR 200)

Before building a single line item, you need to understand the three tests that govern every federal grant expenditure. These come from 2 CFR Part 200 (opens in a new tab), the Uniform Administrative Requirements, commonly called the Uniform Guidance. The 2024 revision (effective October 1, 2024) updated several provisions, including raising the equipment threshold to $10,000.

Every cost in your budget must be:

Allowable: The cost type is permitted under federal regulations and the specific terms of your award. Some costs are always unallowable: entertainment, alcoholic beverages, lobbying, fines and penalties, bad debts. Others are allowable with conditions. Check 2 CFR 200.420 through 200.476 for the full list of cost items and their treatment.

Allocable: The cost directly benefits the funded project. You can't charge your general operating expenses to a grant unless those expenses benefit the project in proportions you can document. A cost is allocable if it was incurred specifically for the award, or if it benefits multiple activities in proportions that can be determined.

Reasonable: A prudent person in similar circumstances would agree the cost is necessary and the price is fair. This is the standard a reviewer applies when questioning your $175/hour consultant or your $2,500 laptop.

All three tests must be satisfied. A cost that's allowable and allocable but not reasonable (paying $500 for office supplies that typically cost $50) fails the standard.

---

The 8 Standard Federal Grant Budget Categories

Federal grant budgets follow the SF-424A form structure. Here's how to write a grant budget for each category, with the calculation formulas and rules that apply.

Category 1: Personnel

Personnel is almost always the largest category and the most heavily scrutinized. List every staff member whose salary will be charged to the grant.

The formula: Annual Salary x % Effort = Amount Charged to Grant

For each person, include:

• Name (or "TBD" for unfilled positions, but only if the NOFO allows it)
• Title and role on the project
• Annual salary or hourly rate
• Percentage of time (effort) on the project
• Number of months on the project (if less than the full period)
• Calculated cost

Rules to know:

• Salary caps apply at some agencies. NIH caps salary charges at Executive Level II: $228,000 for awards issued on or after January 1, 2026. As of October 13, 2026, NIH hasn't posted an FY2027 figure, so check the NIH salary cap summary (opens in a new tab) before you finalize. You can pay someone more, but you can't charge the grant for more than the cap.
• Effort percentages must be realistic. A Project Director at 5% effort for a complex multi-site program is a red flag. Reviewers will question whether the project can function with that little leadership time.
• Cost-of-living adjustments (COLAs) can be built into Year 2 and Year 3 budgets if your organization has a documented annual increase policy. Use the percentage in your written policy, and expect reviewers to ask about anything that looks high for your sector.

Example:

Category 2: Fringe Benefits

Fringe benefits are employer-paid costs on top of salary: FICA (Social Security and Medicare taxes), health insurance, dental, vision, retirement contributions, workers' compensation, and unemployment insurance.

The formula: Personnel Cost x Fringe Rate = Fringe Benefits

Most organizations have an established fringe rate, often negotiated with a federal agency as part of a Negotiated Indirect Cost Rate Agreement (NICRA). If your organization doesn't have one, calculate fringe by listing each component:

For our example, using a 30% fringe rate: $152,750 x 0.30 = $45,825

If you have different fringe rates for different employee types (full-time vs. part-time, faculty vs. staff), apply them separately and explain each rate in your budget justification.

Category 3: Travel

Travel includes all project-related transportation, lodging, and per diem costs. Two federal rules shape this category:

The Fly America Act requires use of U.S. air carriers for all federally funded travel. There are limited exceptions (no U.S. carrier serves the route, or an Open Skies agreement applies). State this compliance in your budget justification.

GSA per diem rates set the maximum reimbursable amounts for lodging and meals at domestic destinations. Check GSA.gov per diem rates (opens in a new tab) for current rates by city.

For each trip, calculate:

• Airfare (per person, round trip, coach class)
• Lodging (GSA rate x number of nights x number of travelers)
• Per diem meals (GSA rate x number of days x number of travelers)
• Ground transportation (taxi, rideshare, rental car)
• Baggage fees if applicable

Example:

Don't include travel that isn't directly tied to the project. Conference attendance should relate to the funded work, and the justification should explain the connection.

Category 4: Equipment

Equipment in the federal definition means tangible personal property with a useful life of more than one year and a per-unit acquisition cost at or above the lesser of your organization's capitalization level or $10,000 (2 CFR 200.1; the $10,000 ceiling was raised from $5,000 in the 2024 revision). If your capitalization policy is $5,000, a $7,000 item is equipment. Items below your threshold go in Supplies.

Important rules:

• Equipment is excluded from the indirect cost (F&A) base at most organizations
• Equipment purchases must be justified as necessary to the project, not just convenient
• Leasing vs. purchasing: if the total lease cost over the project period exceeds 75% of the purchase price, buying is usually more cost-effective and easier to justify
• Used equipment is allowable if the price is fair market value and it's documented

Example:

If your project doesn't require equipment (many don't), enter $0. Don't force costs into this category.

Category 5: Supplies

Supplies are tangible personal property with a per-unit cost below your equipment threshold (the lesser of your capitalization level or $10,000). This covers office supplies, program materials, computer peripherals, software licenses, printing, and consumable items.

Common supply categories:

Be specific. "Miscellaneous supplies: $5,000" will trigger questions from reviewers and grants management staff. Break supplies into identifiable sub-categories.

Category 6: Contractual

Contractual covers services procured from third parties: consultants, subrecipients, subcontractors, and contracted service providers.

Important distinctions:

• Consultants are individuals providing expert advice. There's no single government-wide daily cap; some agencies and programs limit consultant pay through their own statutes or award terms, so check the NOFO and justify your rate against what the market charges.
• Subrecipients carry out a portion of the programmatic work. Under 2 CFR 200.1, the first $50,000 of each subaward is included in your indirect cost base; the portion above $50,000 is excluded. On an NIH award the cutoff is still $25,000 (45 CFR 75.2).
• Contractors provide goods or services (like an evaluation firm or IT vendor). A contract isn't a subaward, so the subaward limit doesn't apply: the full contract amount stays in MTDC as "services."

Example:

For subawards, you'll typically need a scope of work and sub-budget from the partner organization as part of your application package.

Category 7: Other

"Other" is the catch-all category for direct costs that don't fit in the previous six categories. Common items include:

Watch out for costs that belong in other categories. A common mistake is putting consultant fees in "Other" when they belong in "Contractual," or putting laptops in "Other" when they belong in "Supplies" or "Equipment."

Category 8: Indirect Costs (Facilities and Administrative)

Indirect costs (also called F&A or overhead) cover organizational expenses that benefit the project but can't be directly attributed to it: building rent, utilities, accounting, human resources, general administration.

Three options for calculating indirect costs:

1. Negotiated rate (NICRA): If your organization has a federally negotiated rate, apply it to your Modified Total Direct Costs (MTDC). Rates vary widely, from 15% at small nonprofits to 60%+ at research universities.
2. De minimis rate: Organizations without a current federal negotiated rate can use up to 15% of MTDC. This rate was established by 2 CFR 200.414(f) and requires no negotiation or documentation of actual costs. NIH awards are the exception: per NOT-OD-26-072, NIH uses 10% of MTDC and a base that counts the first $25,000 of each subaward instead of $50,000.
3. Program-specific cap: Some NOFOs cap indirect costs regardless of your NICRA, when a statute or regulation requires it or the agency has approved a deviation (2 CFR 200.414(c)). Department of Education training grants, for example, are limited to 8% of MTDC under 34 CFR 75.562. If the cap is lower than your negotiated rate, you must use the cap.

MTDC calculation: Start with total direct costs, then subtract (2 CFR 200.1):

• Equipment
• Capital expenditures
• Patient care charges
• Rental costs
• Tuition remission
• Scholarships and fellowships
• Participant support costs
• The portion of each subaward above $50,000 (above $25,000 on NIH awards)

Example using a 20% negotiated rate:

If the IT support were instead a $42,000 subaward, nothing would come out of the base either, because it's under the $50,000 limit. On an NIH award, $17,000 of it (the part above $25,000) would come out.

To try your own numbers, use the free grant budget calculator. Its 15% option follows 2 CFR 200; for an NIH budget, pick its negotiated-rate option and enter 10% or your negotiated rate.

---

Complete Sample Budget: Year 1 of a Federal Grant ($379,870)

Here's a complete Year 1 budget for a hypothetical 12-month community health program, showing how all 8 categories come together.

For a multi-year project, you'd add a column for each year. Year 2 would carry the same staff forward with the COLA in your written policy (3% on the $152,750 personnel line is $4,583), drop the one-time $14,500 equipment purchase, and change other lines with the program phase, such as higher participant costs as enrollment grows. With the same staff, Year 2 costs about as much as Year 1, so size a multi-year request from the year-by-year totals, not from the award ceiling.

---

Budget vs. Budget Justification: Understanding the Difference

This is a point of confusion for many applicants, so it's worth stating clearly.

The budget is the numbers. It's a table or spreadsheet showing dollar amounts for each category and each year of the project. For federal grants, this is typically the SF-424A form.

The budget justification is the explanation. It's a written narrative (usually 3-10 pages) that walks through every line item, showing how you calculated it and why it's necessary. The justification is where you demonstrate that each cost meets the allowable/allocable/reasonable tests.

You need both. A budget without a justification is a list of numbers with no context. A justification without a budget is a narrative with nothing to verify against.

For a detailed guide on writing the narrative portion, see our guide on how to write a grant budget justification. For a breakdown of what goes in each category, see federal grant budget categories explained.

---

Common How to Write a Grant Budget Mistakes

Mistake 1: Math Errors

This sounds basic, but math errors are among the top reasons budgets get sent back for revision. Fringe benefits that don't equal the stated percentage times personnel costs. Travel calculations where the number of nights doesn't match the per diem total. Year 1 + Year 2 + Year 3 that don't equal the total project budget. Use a spreadsheet with formulas, not manual calculations.

Mistake 2: Budget Doesn't Match the Project Narrative

If your narrative describes a project with six community health workers but your budget only funds three, reviewers notice. If you describe a multi-site evaluation but don't budget travel between sites, that's a disconnect. Build your budget from your project design, not the other way around.

Mistake 3: Missing or Incorrect Indirect Cost Documentation

If you claim a negotiated indirect cost rate, you must attach your current NICRA agreement to the application. If you're using the de minimis rate, state that explicitly. If the NOFO caps indirect costs, use the cap, not your negotiated rate. Getting indirect costs wrong is one of the most common reasons budgets get negotiated downward after award.

Mistake 4: Inflating Costs to Hit the Maximum

Reviewers and grants management staff can tell when costs are padded. $50,000 in "miscellaneous supplies" or $30,000 in travel for a local program raises questions. Budget what you need, not what's available. If the maximum award is $500,000 and your legitimate costs total $420,000, submit a $420,000 budget. Agencies would rather fund a realistic $420,000 proposal than negotiate down a padded $500,000 one.

Mistake 5: Forgetting Cost Sharing and Matching

Some NOFOs require cost sharing (also called matching funds). If the NOFO requires a 20% match on a $400,000 award, you need to document $80,000 in organizational contributions. Cost sharing must follow the same allowable/allocable/reasonable rules as direct charges. In-kind contributions must be valued at fair market value and documented. Missing or undocumented cost sharing can disqualify your application.

Mistake 6: Putting Costs in the Wrong Category

Consultant fees in "Other" instead of "Contractual." Laptops below your equipment threshold in "Equipment" instead of "Supplies," or the reverse when your capitalization level is lower than $10,000. Participant stipends in "Personnel" instead of "Other." Miscategorized costs don't just look sloppy; they can affect your indirect cost calculation if items are in or out of the MTDC base incorrectly.

---

What 2 CFR 200 Doesn't Tell You

The Uniform Guidance tells you the rules. What it doesn't tell you is how grants management specialists actually apply those rules during pre-award review.

When a GMS reviews your budget after the peer review is complete, they're not re-scoring your application. They're looking for costs that might create problems post-award. They flag line items that are close to the boundary between allowable and unallowable, and they pay special attention to consultant rates, equipment that could be shared with other programs, and travel that seems loosely connected to the project.

The negotiation that follows can trim line items the GMS can't tie to the work plan or to the cost principles, and how deep those cuts go depends on the agency and the program.

What most applicants don't realize is that the GMS uses your budget justification as their primary reference document, not your budget form. If a line item appears on the SF-424A but isn't explained in the justification, the GMS may cut it entirely rather than contact you for clarification. This happens more often during periods when agencies are processing large volumes of awards, like the end of the fiscal year.

The practical takeaway: every dollar on your budget form should have a corresponding explanation in your justification. No orphan line items.

---

How a Grant Budget Connects to Your Full Proposal

Your budget doesn't exist in isolation. It's tied to every other section of your federal grant proposal:

• Needs statement: The scope of the problem justifies the scale of your budget. A $500K budget for a problem affecting 50 people will raise questions. See our guide on writing a needs statement.
• Project narrative: Every activity you describe should have a corresponding budget line. If you promise community outreach events, budget for venue rental, materials, and staff time.
• Evaluation plan: Your evaluation plan should align with the evaluation costs in your budget, whether that's an external evaluator in Contractual or staff time for data collection in Personnel.
• Abstract: The total amount referenced in your abstract must match your budget total exactly.

Related Guides

• NIH Modular Budget

---

Sources

• 2 CFR 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements (opens in a new tab)
• Grants.gov: SF-424 Family Forms (opens in a new tab)
• GSA Per Diem Rates (opens in a new tab)
• NIH Salary Cap Summary (opens in a new tab)
• 34 CFR 75.562: Indirect cost rates for training grants (opens in a new tab)
• NIH NOT-OD-26-072: indirect-cost provisions of 45 CFR 75 continue for NIH awards (opens in a new tab)
• NIH Grants Policy Statement 7.4: Reimbursement of Indirect Costs (opens in a new tab)