IRS announces Q4 2026 interest rates

The Internal Revenue Service has announced an interest rate update for the quarter beginning Oct. 1, with rates holding steady from the previous quarter.

Each quarter, the IRS sets interest rates for overpayments and underpayments based on the federal short-term rate determined by the U.S. Treasury. For individuals, both the underpayment and overpayment rates are set at the federal short-term rate for the first month of the previous quarter plus 3 percentage points, compounded daily.

The formula is more complex for corporations. Generally, the underpayment rate is the federal short-term rate plus 3 percentage points, while the overpayment rate is the federal short-term rate plus 2 percentage points. Large corporate underpayments carry a higher rate of the federal short-term rate plus 5 percentage points. For the portion of a corporate overpayment exceeding $10,000, the rate is the federal short-term rate plus 0.5 percentage point.

For the quarter starting Oct. 1, the rates will remain the same. For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily. Other newly announced rates include:

  • 7% for overpayments by individuals (payments made in excess of the amount owed)
  • 6% for overpayments by corporations
  • 4.5% for the portion of a corporate overpayment exceeding $10,000
  • 7% for underpayments (taxes owed but not fully paid)
  • 9% for large corporate underpayments

The interest rates are based on the federal short-term rate determined during July 2026.