NIH Budget Rises to $48.7 Billion as Indirect Cost Cap Dies in Court

The National Institutes of Health will operate with a $48.7 billion budget in fiscal year 2026 — a $415 million increase that, combined with court rulings permanently blocking the administration's proposed 15 percent indirect cost cap, gives research institutions their most stable funding outlook in over a year.

Congress Rejects a 40 Percent Cut

The administration had proposed slashing NIH funding by roughly 40 percent. Congress rejected that entirely, passing a bipartisan spending bill that increased the agency's budget by 0.9 percent over fiscal year 2025. President Trump signed the bill into law.

While the increase barely keeps pace with biomedical research inflation — typically 3 to 4 percent annually — the political signal matters. Both chambers demonstrated that deep NIH cuts remain a nonstarter, even in a Congress willing to trim other discretionary programs.

The Overhead Fight Ends in Court

The more consequential development for research universities is the federal appeals court ruling that permanently blocked NIH's plan to cap indirect cost reimbursements at 15 percent. The judges upheld a lower court's injunction, finding that the proposed cap violated explicit congressional language protecting negotiated rates.

The FY2026 spending bill reinforces that protection with new statutory language preventing changes to negotiated indirect cost rates across all Department of Health and Human Services research agencies. For research universities — where indirect costs typically run 50 to 60 percent of direct costs — the combined judicial and legislative protection removes a threat that had cast uncertainty over hiring, facility investments, and multi-year research planning throughout 2025.

What Changes for Grant Applicants

Researchers can submit NIH proposals with greater confidence that their institutions' negotiated F&A rates will be honored. However, the near-flat budget means competition for awards remains intense. New research security training requirements and mandatory Common Forms for biographical sketches take effect in 2026 — applicants should verify updated submission guidelines before their next deadline.

Grant seekers can explore NIH and other federal research funding through Granted, which tracks thousands of opportunities across federal agencies.