Equipment (2 CFR 200.1 Definition)

Under 2 CFR 200.1 of the Uniform Guidance, “Equipment” is a defined term with a precise two-part test, and getting it wrong distorts a budget, an indirect-cost calculation and a property record at the same time. The regulation reads: equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost that equals or exceeds the lesser of the capitalization level established by the recipient or subrecipient for financial statement purposes, or $10,000.

The two prongs

• Useful life of more than one year. A consumable fails here no matter how expensive it is.
• Per-unit acquisition cost at or above the lesser of the institution’s own capitalization level or $10,000. Both halves of “the lesser of” matter. An institution that capitalises at $5,000 applies $5,000, not $10,000 — the federal figure is a ceiling on the threshold, not a floor for the institution. An item that fails either prong is not equipment and is treated as supplies.

The $10,000 figure replaced the long-standing $5,000 federal threshold in the 2024 revision of the Uniform Guidance. The practical consequence for research administration is that the applicable number depends on which award an item is charged to, so institutions that raised their capitalization level had to run both thresholds side by side through the transition rather than switching everything at once.

Acquisition cost is not the invoice price

2 CFR 200.1 defines acquisition cost as the total cost of the asset including the cost to ready it for its intended use — for equipment, the net invoice price plus the cost of any modifications, attachments, accessories or auxiliary apparatus necessary to make it usable for the purpose acquired. Ancillary charges such as taxes, duty, protective in-transit insurance, freight and installation may be included or excluded in accordance with the institution’s regular accounting practices. A $9,400 instrument with a $900 required mounting frame can therefore cross a $10,000 threshold that the invoice alone would not.

The related definitions

• General purpose equipment — equipment not limited to research, medical, scientific or other technical activities. The regulation’s own examples are office equipment and furnishings, modular offices, telephone networks, information technology equipment and systems, air conditioning equipment, reproduction and printing equipment, and motor vehicles.
• Special purpose equipment — equipment used only for research, medical, scientific or similar technical activities. The examples given are microscopes, x-ray machines, surgical instruments, spectrometers, and associated software.
• Capital assets — tangible or intangible assets used in operations with a useful life over one year that are capitalized under GAAP, including land, buildings, equipment and intellectual property, plus additions and improvements that materially increase value or useful life (not ordinary repairs and maintenance).
• Computing devices — machines that acquire, store, analyze, process and publish data electronically, including peripherals. Information technology systems covers computing devices, ancillary equipment, software, firmware and related procedures, services and resources.

Why the classification has consequences

Allowability and prior approval (2 CFR 200.439)

The general/special purpose distinction is not cosmetic — it changes when you need written permission:

• 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 — at any dollar value.
• Capital expenditures for special purpose equipment are allowable as direct costs provided that items with a unit cost of $10,000 or more have prior written approval.
• Improvements to land, buildings or equipment that materially increase value or useful life likewise require prior written approval.
• Equipment and other capital expenditures are unallowable as indirect costs.

Title, use and stewardship (2 CFR 200.313)

Title to equipment acquired under a federal award vests in the recipient on acquisition, but as a conditional title unless a federal statute authorises unconditional vesting: clear title is withheld until the award’s conditions are met. The recipient must use the equipment for the authorized purposes during the period of performance or until it is no longer needed, must not dispose of or encumber it without approval while it is being used for the originally authorized purpose, and when it is no longer needed for the original project must give priority to other awards from the funding agency, then to awards from other federal agencies.

Supplies are treated differently (2 CFR 200.314)

Title to supplies vests on acquisition with no conditional-title mechanism. The distinct obligation arises only at the end: where a residual inventory of unused supplies (new, unused, unopened) exceeds $10,000 in aggregate value at the end of the period of performance and they are not needed for another federal award, the recipient may retain or sell them, and the federal agency is entitled to compensation calculated by applying the federal share percentage to current market value or sale proceeds. The aggregate test covers all supply types, not like items only, and up to $1,000 of sale proceeds may be retained for selling and handling costs.

Records for property and equipment acquired with federal funds must be retained for three years after final disposition under 2 CFR 200.334(c) — a different clock from the general three-years-from-final-report rule.

What this means in practice

Three recurring errors follow from misapplying the definition. Budgeting an item as equipment when it is actually supplies overstates the exclusion from modified total direct cost and understates recoverable indirect costs. Treating a below-threshold computing device as equipment creates a property record and a disposition obligation that the rules never imposed. And treating a piece of general purpose equipment as special purpose skips a prior-approval step that has no dollar floor — the most common single cause of a disallowed equipment cost.

Frequently Asked Questions

What is the equipment threshold under 2 CFR 200.1?

Under 2 CFR 200.1, an item is “Equipment” only if it has a useful life of more than one year and a per-unit acquisition cost that equals or exceeds the lesser of the recipient institution’s own capitalization level or $10,000. The $10,000 figure applies to federal awards issued on or after October 1, 2024; it replaced a $5,000 default that applied to earlier awards.

What’s the difference between equipment and supplies under 2 CFR 200.1?

2 CFR 200.1 defines “Supplies” as all tangible personal property other than Equipment, including computing devices that fall below the Equipment cost threshold regardless of how long they’ll last. An item counts as Equipment only if it meets both the useful-life-over-one-year test and the cost test; if it fails either one, it’s a Supply — expensed through ordinary purchasing records rather than tagged and entered into the institution’s asset-management system.

Does NIH use a different equipment threshold than 2 CFR 200.1?

No. NIH does not maintain its own definition of Equipment — as an HHS operating division, it applies the same government-wide 2 CFR 200.1 definition and threshold to its own grants, and the NIH Grants Policy Statement incorporates 2 CFR Part 200 by reference rather than restating a competing figure. An “NIH-specific” equipment definition found elsewhere is usually just an outdated source still citing the superseded $5,000 figure.

Why do some sources still cite $5,000 as the equipment threshold instead of $10,000?

A 2024 revision to 2 CFR 200 raised the government-wide default capitalization floor for Equipment from $5,000 to $10,000, effective for federal awards issued on or after October 1, 2024. Older institutional policy pages, training materials, and secondary sources written before that change often still show $5,000, so it’s worth checking the source’s date and the issuance date of the specific award in question.

Can an institution use a capitalization threshold other than $10,000?

Yes, but only downward. 2 CFR 200.1 sets the threshold at the lesser of the institution’s own capitalization level or $10,000, so an institution with a lower internal policy (e.g., $5,000) must apply its own lower figure to federal awards. An institution cannot set its threshold above $10,000 to keep sub-$10,000 items out of Equipment treatment — $10,000 operates as a ceiling.

What happens to equipment when a federal award ends?

Equipment disposition is governed by 2 CFR 200.313, which sets rules for sale, transfer, or retention of the item. Above certain fair-market-value thresholds, disposition may require federal agency instructions or return of the government’s proportional interest in the item’s value.