IRS Keeps Interest Rates Unchanged for the Rest of 2026
The IRS announced that interest rates will remain the same for the calendar quarter beginning October 1, 2026.
Interest Rates
For individuals, the rate for overpayments (money the IRS owes you) and underpayments (money you owe the IRS) will be 7% per year.
Here’s what the numbers look like:
- 7% for overpayments, 6% for corporations
- 4.5% for the portion of a corporate overpayment exceeding $10,000
- 7% for underpayments
- 9% for large corporate underpayments
The interest rate is set quarterly. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, for a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points, and the overpayment rate is the federal short-term rate plus 2 percentage points. For large corporate underpayments, the rate is the federal short-term rate plus 5 percentage points. For the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period, the rate is the federal short-term rate plus one-half (1/2) of a percentage point.
The interest is compounded daily, meaning it’s added to the balance each day, and the next day’s interest is calculated on that new balance. In short, interest accrues on interest.
Overpayments
The IRS pays interest when it has held your overpayment long enough for the Code to require interest to accrue. So the 7% “overpayment” rate does not mean every refund earns 7%. The IRS only owes interest when the statutory requirements are met.
For an ordinary individual income-tax refund, if the IRS issues the refund within 45 days after the return’s due date, it generally doesn’t owe interest. If the return is filed late, that 45-day period generally runs from the date the return is filed. If the IRS takes longer, overpayment interest generally becomes payable.
(With withholding and estimated tax payments, those payments are generally treated as made on the return’s due date.)
A quick count will show that I used “generally” three times in a row. That’s because, since this is tax, there are exceptions that apply.
One more note: Refund interest is taxable. So when the IRS pays you interest on a refund, you generally have to report that interest as income. Quite the hamster wheel, right?
The IRS rate is tied to the federal short-term rate, not directly to the Federal Reserve’s benchmark rate. But with short-term rates holding relatively steady, the IRS rate is staying put, too.
More Information
You can find more details in Revenue Ruling 2026-15 (it will also appear in Internal Revenue Bulletin 2026-36, dated August 31, 2026).
