Finally! AWS Transit Gateway Gets Flexible Cost Allocation

If you’ve been managing AWS Transit Gateway costs in a multi-account environment, you’ve probably felt the pain of sender-pay billing. Well, I’ve got great news, AWS just launched Flexible Cost Allocation for Transit Gateway and your FinOps team is going to love this!

This is one of those features that makes you go “FINALLY!” Because let’s be honest, trying to allocate Transit Gateway costs fairly across accounts and teams has been a nightmare. The old sender-pay model meant whoever initiated the traffic got the bill, which rarely reflected the actual business value or consumption patterns.

Let’s dive into what this feature does and how you can implement it in your organization.

The Transit Gateway Cost Allocation Problem

Before we get into the solution, let’s talk about why this was such a pain point.

Transit Gateway traditionally used a sender-pay billing model. The account that owns the source attachment pays for ALL data processing charges. This works okay for simple setups, but breaks down spectacularly at scale.

Picture this common scenario:

You’re running a centralized networking hub. Your central IT account owns the Transit Gateway and Direct Connect attachments. Ten application teams have VPCs attached for internet egress and on-premises connectivity.

With sender-pay billing, guess who gets charged for ALL the traffic coming from on-premises into those application VPCs? Yep, the central IT team.

Now try going to your application teams and saying “Hey, we need to charge you back for networking costs, but we can’t actually show you which costs are yours versus everyone else’s.” Good luck with that conversation!

The Cascading Problems

This limitation created several knock-on effects:

Chargeback nightmare: Central teams can’t accurately bill application owners because costs don’t align with actual consumption patterns.

Cost visibility gaps: Application teams have no transparency into their network spend, making it impossible to optimize.

Resource optimization challenges: You can’t identify which workloads drive costs when everything lands in one account.

Budget allocation issues: Central networking budgets balloon while application teams underspend their allocations.

The Core Issue: When the account initiating traffic doesn’t reflect the account consuming the service, you lose accurate cost attribution. This makes showback/chargeback nearly impossible and hides optimization opportunities.

How Flexible Cost Allocation Changes things

Flexible Cost Allocation gives you granular control over which AWS account gets charged for Transit Gateway data processing costs. Instead of always billing the source attachment owner, you can now implement metering policies that define cost allocation rules based on traffic characteristics.

Think of it as creating a rule engine for your Transit Gateway billing. You define the rules, Transit Gateway applies them, and costs flow to the appropriate accounts.

Three Allocation Models

You can now choose from three different allocation approaches:

1. Source Attachment Owner (Default)

The account that owns the originating attachment pays, this is the traditional sender-pay model. It’s still useful for client-based billing scenarios where you want the initiator to bear the costs.

2. Destination Attachment Owner

The account that owns the destination attachment pays. This is perfect for application teams consuming services. For example, when app VPCs pull data from on-premises, the destination VPC owner gets the bill.

3. Transit Gateway Owner

The central account that owns the Transit Gateway absorbs all costs. This works well for shared services models where central IT covers infrastructure costs as part of their operational budget.

Metering Policies

Metering policies are ordered rule sets (up to 50 rules) that match traffic and assign costs to specific accounts. Rules are evaluated sequentially by rule number until a match is found.

Each rule can match based on:

• Source/destination attachment types (VPC, VPN, DX Gateway, etc.)
• Specific attachment IDs
• IP address ranges (CIDR blocks)
• Port ranges and protocols

Important: Only the Transit Gateway owner can configure metering policies. Changes take effect at the end of the current billing hour, so plan your updates accordingly.

When You Should Use This (Real Scenarios)

Let me walk you through some real-world scenarios where this feature solves actual problems.

Use Case #1: Charging Apps for Their On-Premises Data

Before: Central IT owns the Transit Gateway and Direct Connect Gateway. When data flows from on-premises into 20 different application VPCs, the central networking account gets hit with all the data processing charges.

After: Implement a metering policy that charges the destination VPC owner for inbound traffic from the Direct Connect Gateway attachment.

Business Impact:

• Application teams see their actual network consumption
• Accurate showback/chargeback becomes possible
• Central IT budget no longer subsidizes application data transfer
• Teams optimize their on-premises data pulls when they see the costs

Here’s what the rule configuration looks like:

{
  "MeteringPolicyRule": {
    "RuleNumber": 10,
    "SourceAttachmentType": "DirectConnectGateway",
    "DestinationAttachmentType": "VPC",
    "ChargeToAccount": "DestinationOwner"
  }
}

Use Case #2: Inspection VPC Cost Allocation

Before: Security team runs a centralized inspection VPC. All traffic flows through inspection appliances (firewalls, IDS/IPS) before reaching application VPCs. Security team’s AWS bill becomes astronomical because they’re charged for everyone’s traffic traversing their inspection VPC.

After: Configure metering policy to charge application VPC owners for their traffic, even though it flows through the security team’s inspection attachment.

Business Impact:

• Security team budget no longer includes application data costs
• Each application team pays for their own inspection costs
• Transparent security costs drive architecture conversations
• Budget planning becomes more accurate across teams

Configuration Approach: Use the middlebox attachment feature to designate your inspection VPC attachment. This allows you to charge the originating or destination application VPC owner instead of the inspection VPC owner.

Use Case #3: Client-Based Network Billing

Before: You’re running a multi-tenant SaaS platform. Each client has a dedicated VPC. Clients consume shared services (databases, APIs) in your central services VPC. You’re absorbing all Transit Gateway costs with no way to attribute them to specific clients.

After: Implement metering policies that charge each client VPC owner for their traffic to/from shared services.

Business Impact:

• Network costs become a line item in client billing
• Real cost attribution for multi-tenant architecture
• Identify high-traffic clients for architecture optimization
• Better margin visibility per client

Use Case #4: VPC Owner Pays Everything

Before: Application teams argue about whether source or destination should pay for inter-VPC traffic. Political debates delay architecture decisions.

After: Simple policy: Each VPC owner pays for ALL traffic to/from their VPC, regardless of direction.

Business Impact:

• Eliminates cost allocation debates
• Clear ownership model
• Each team optimizes their total network footprint
• Simplified chargeback reporting

What This Means for Your AWS Bill

Let’s be clear about something important: Flexible Cost Allocation doesn’t reduce your total Transit Gateway bill. It redistributes costs to the accounts that should logically bear them.

Sample Cost Redistribution

Before (Sender-Pay):

Central IT Account:    $5,000/month (100% of TGW costs)
App Team A Account:    $0
App Team B Account:    $0
App Team C Account:    $0
Total:                 $5,000/month

After (Destination-Pay for Hybrid Traffic):

Central IT Account:    $500/month (VPN/DX attachment fees only)
App Team A Account:    $1,800/month (their actual data consumption)
App Team B Account:    $1,200/month (their actual data consumption)
App Team C Account:    $1,500/month (their actual data consumption)
Total:                 $5,000/month (same total, better attribution)

The Real Value

The value isn’t in cost reduction, it’s in:

Visibility: Application teams see their true network costs for the first time.

Accountability: Teams optimize when they see the bill.

Fairness: Costs align with consumption, not arbitrary technical implementation.

Budgeting: Each team can accurately plan their networking expenses.

Optimization: When App Team A sees $1,800/month in Transit Gateway costs, they start asking questions like “Do we really need to pull all this data from on-premises?” or “Could we cache this in S3 instead?”

Things to Watch Out For

There are always a few limitations and gotchas.

• Only Transit Gateway Owners Can Configure

You can’t delegate metering policy configuration to other accounts. The Transit Gateway owner account has exclusive control.

• Changes Aren’t Instant

Policy changes take effect at the end of the current billing hour. If you make a change at 2:45 PM, it becomes active at 3:00 PM.

• 50 Rules Maximum

Each metering policy supports up to 50 rules. For most organizations, this is plenty.

What’s Excluded

Metering policies only affect:

• Transit Gateway data processing charges
• Site-to-Site VPN data transfer
• Direct Connect data transfer
• TGW peering data transfer

They don’t affect:

• Attachment hourly charges (always billed to attachment owner)
• Multicast data processing
• Network Function charges (except when explicitly configured)

You will still have some costs in the attachment owner accounts.

What’s Next for Transit Gateway Cost Management

This is a huge step forward for AWS networking cost management, but there’s still room for improvement.

What I’d love to see next:

Better Cost Explorer Integration: Native filtering by metering policy rules in Cost Explorer. Right now, you can see costs by account, but not easily trace them back to specific policy rules that allocated them.

Policy Simulation: A “dry run” mode that shows what costs would be allocated without actually changing billing. This would make testing and communication so much easier.

Multi-Region Policy Management: Centralized management of policies across regions. Currently, you manage policies per Transit Gateway, which gets tedious at scale.

Cost Forecasting: Integration with AWS Cost Anomaly Detection that understands metering policy changes. When you change allocation rules, anomaly detection should expect the cost shifts.

That said, AWS has solved the fundamental problem, we can now allocate Transit Gateway costs accurately.

For organizations running multi-account Transit Gateway architectures, this feature is a real step forward for FinOps maturity.

Wrapping Up

Flexible Cost Allocation for Transit Gateway finally solves one of the biggest pain points in multi-account AWS networking. While it doesn’t reduce your total costs, it puts charges where they belong, with the teams actually consuming the resources.

If you’re running Transit Gateway in a multi-account environment, implementing flexible cost allocation should be on your Q1 2026 roadmap. Your FinOps team will thank you.

I hope this helps someone else!

Cheers