Indirect costs in residential construction projects refer to any expenditures that are not related to direct labor or materials, such as the cost of administrative and overhead expenses, insurance premiums, taxes and licensing fees. These costs are essential for the completion of a project, but they do not add directly to its value. They may also include indirect labor costs such as wages for workers who are not directly involved in construction but whose services are essential to the project, such as administrative staff.

Properly accounting for indirect costs when creating a project estimate is essential to ensure that the project includes all allocated resources and that it reflects the true cost involved in creating something of value.