Rates last updated: October 20, 2026.
October 2026 rates are from IRS Revenue Ruling 2026-19. November 2026 rates are already out, in Revenue Ruling 2026-21.
The current AFR for October 2026 is 4.25% short-term, 4.61% mid-term and 5.22% long-term, from Rev. Rul. 2026-19, and the Section 7520 rate is 5.6%. November's rates are higher: 4.67%, 5.08% and 5.52%, with a Section 7520 rate of 6.2%, from Rev. Rul. 2026-21. Use the month your loan is made or your sale contract is signed.
A client calls about lending $500,000 to a family member over seven years and wants to know the minimum rate they can charge without triggering gift tax or phantom interest. You need the current mid-term AFR, and you need to know it traces to the actual IRS ruling, not a stale blog post from three months ago.
Every rate on this page shows its governing citation, so you can verify it yourself, and the review date at the top shows when we last checked it against IRS.gov. If you landed here from an older monthly AFR post (like a December 2025 or February 2025 AFR update), this is the evergreen table we keep current.
| Month | Short-term | Mid-term | Long-term | Section 7520 rate | Source |
|---|---|---|---|---|---|
| October 2026 (in effect now) | 4.25% | 4.61% | 5.22% | 5.6% | Rev. Rul. 2026-19 |
| November 2026 (published) | 4.67% | 5.08% | 5.52% | 6.2% | Rev. Rul. 2026-21 |
All AFRs shown at annual compounding. Semiannual, quarterly and monthly rates are in the full tables below.
The Applicable Federal Rate is the IRS-published minimum interest rate for loans and certain deferred-payment transactions. If you charge less than the AFR on a loan between related parties or structure an installment sale without adequate stated interest, the IRS imputes phantom interest income to the lender and recharacterizes part of the transaction.
The AFR changes monthly. Each month's rates come from a numbered revenue ruling published in the Internal Revenue Bulletin, typically released between the 15th and 20th of the preceding month. The rate in effect when a binding contract is signed governs that transaction.
Source: IRS Revenue Ruling 2026-19, Table 1, effective for loans and sales made in October 2026.
| Term | Annual | Semiannual | Quarterly | Monthly |
|---|---|---|---|---|
| Short-term (3 years or less) | 4.25% | 4.21% | 4.19% | 4.17% |
| Mid-term (over 3, up to 9 years) | 4.61% | 4.56% | 4.53% | 4.52% |
| Long-term (over 9 years) | 5.22% | 5.15% | 5.12% | 5.10% |
Source: IRS Revenue Ruling 2026-21, Table 1, effective for loans and sales made in November 2026.
| Term | Annual | Semiannual | Quarterly | Monthly |
|---|---|---|---|---|
| Short-term (3 years or less) | 4.67% | 4.62% | 4.59% | 4.58% |
| Mid-term (over 3, up to 9 years) | 5.08% | 5.02% | 4.99% | 4.97% |
| Long-term (over 9 years) | 5.52% | 5.45% | 5.41% | 5.39% |
The mid-term AFR rises 47 basis points from October. If a client is deciding whether to sign a note this month or next, that gap is the conversation: the same $500,000 seven-year loan carries a minimum rate of 4.61% in October and 5.08% in November.
If your file includes a loan or sale from an earlier month, use that month's rate, not today's.
Source: IRS Revenue Ruling 2026-17, Table 1.
| Term | Annual | Semiannual | Quarterly | Monthly |
|---|---|---|---|---|
| Short-term (3 years or less) | 4.18% | 4.14% | 4.12% | 4.10% |
| Mid-term (over 3, up to 9 years) | 4.49% | 4.44% | 4.42% | 4.40% |
| Long-term (over 9 years) | 5.12% | 5.06% | 5.03% | 5.01% |
Source: IRS Revenue Ruling 2026-13, Table 1.
| Term | Annual | Semiannual | Quarterly | Monthly |
|---|---|---|---|---|
| Short-term (3 years or less) | 4.10% | 4.06% | 4.04% | 4.03% |
| Mid-term (over 3, up to 9 years) | 4.35% | 4.30% | 4.28% | 4.26% |
| Long-term (over 9 years) | 4.92% | 4.86% | 4.83% | 4.81% |
The Section 7520 rate is used to value GRATs, charitable remainder trusts, qualified personal residence trusts, and other split-interest transfers. It's derived from 120% of the annual mid-term AFR, rounded to the nearest 0.2%. Revenue Ruling 2026-19 publishes that 120% mid-term figure as 5.54% in Table 1 of the ruling, which rounds to the published 5.6% Section 7520 rate in Table 5. The IRS Section 7520 interest rates page confirms the same figure each month.
November works the same way. Revenue Ruling 2026-21 publishes the 120% mid-term figure as 6.11%, which rounds to 6.2%.
Use the figure the ruling prints, not the mid-term AFR times 1.2 by hand. For October, 4.61% times 1.2 gives 5.53%, but the ruling prints 5.54%, because the IRS multiplies the unrounded mid-term rate.
For a charitable gift, Section 7520 also lets the taxpayer elect the rate from either of the two months before the valuation month. With November's rate 0.6 points above October's, check which month's rate helps your client before you value a charitable transfer in November.
Which rate applies depends on term: a three-year note uses short-term, a seven-year note uses mid-term, a fifteen-year note uses long-term. The rate in effect the month the binding contract is signed applies, and for a term loan it stays locked for the life of the loan.
Section 7872 governs loans between related parties, including family members, employer-employee relationships, and corporation-shareholder arrangements. If the stated rate is below the AFR for the term, the IRS treats the shortfall as "forgone interest," imputed back to both parties.
The mechanics work like this: the lender is treated as having received phantom interest income equal to the forgone amount, and the same amount is treated as transferred to the borrower as a gift, dividend, or compensation. Charging at least the AFR in effect the month the loan is made avoids the imputation entirely.
Your client wants to lend $500,000 to their adult child for a business investment, with repayment over seven years. A seven-year term falls in the mid-term category (over 3 years, up to 9 years).
Using the October 2026 annual mid-term AFR of 4.61%, the loan must charge at least 4.61% interest to avoid imputed interest under Section 7872. At that rate, annual interest on the $500,000 principal is $23,050. By documenting the loan at 4.61% (or higher) with a written note signed in October 2026, the client locks that rate for the full seven-year term, regardless of where AFRs move in future months.
If the client charged 2% instead, the 2.61% shortfall (4.61% minus 2%) would be treated as forgone interest. The lender would report phantom interest income of approximately $13,050 annually, and the same amount would be characterized as a taxable gift from lender to borrower. That is a rough annual figure. Section 7872(e)(2) measures forgone interest on a term loan by present value, so run the actual schedule before you quote a number.
If the same note is signed in November instead, the mid-term AFR is 5.08%, so the minimum interest is $25,400 a year. Signing in October saves the borrower $2,350 a year for the full seven years. If you want that comparison run for a client's actual terms, you can ask Bizora for the current AFR and the ruling it comes from, and the citation comes back with the answer.
Aggregate loans of $10,000 or less between the same parties escape imputation if the funds are not used to buy income-producing assets. For gift loans up to $100,000, imputed interest is capped at the borrower's net investment income, and if that income is $1,000 or less it is treated as zero.
When a deferred-payment sale does not charge adequate stated interest, part of the purchase price gets recharacterized as interest under Section 483 or Section 1274. "Adequate" generally means a stated rate at least equal to the AFR for the term of the payments.
Section 1274 applies to most seller-financed property sales and treats the shortfall as original issue discount (OID), reported on an accrual basis. Section 483 applies in narrower situations, typically smaller or shorter transactions, with unstated interest reported as payments are received.
Section 1274A caps the discount rate used for purposes of Sections 483 and 1274 at 9%, compounded semiannually, for qualifying debt below an inflation-adjusted threshold. For 2026, that threshold is $7,462,600 for a standard qualified debt instrument and $5,330,500 for a cash-method debt instrument, per Rev. Proc. 2025-32, section 4.40.
Those figures adjust annually; the $2,800,000 and $2,000,000 amounts sometimes cited elsewhere are the frozen 1989 statutory base, not the current threshold. At October 2026 AFR levels, this ceiling isn't binding regardless.
Section 453A applies only to installment obligations from sales where the price exceeds $150,000. The interest charge on deferred tax liability is triggered when the aggregate face amount of qualifying obligations arising in the current taxable year and outstanding at year-end exceeds $5 million, calculated using the Section 6621(a)(2) underpayment rate (the federal short-term rate plus 3 percentage points), not the AFR itself.
The Section 7520 rate for October 2026 is 5.6%, and for November 2026 it is 6.2%. This rate is distinct from the AFRs used for loans and sales.
For a deeper look at valuation, see our guide to the current Section 7520 rate. Section 7520 governs the valuation of annuities, life estates, and remainder interests in split-interest transfers. It applies to GRATs (grantor retained annuity trusts), charitable remainder trusts, charitable lead trusts, qualified personal residence trusts, and private annuities.
The rate is derived from the AFR: 120% of the annual mid-term AFR, rounded to the nearest two-tenths of a percent. Revenue Ruling 2026-19 publishes that 120% figure as 5.54% for October 2026, which rounds to the published 5.6% rate. Revenue Ruling 2026-21 publishes 6.11% for November 2026, which rounds to 6.2%.
The IRS publishes every AFR revenue ruling at the IRS AFR index, and each ruling also appears in the weekly Internal Revenue Bulletin. That's the primary authority.
Bizora traces the current rate for any AFR category back to the exact revenue ruling, with the citation and reasoning path visible through View Steps. If you're drafting a memo on a below-market loan or installment sale, Canvas can pull the current AFR into the draft with the citation attached, so you spend less time verifying numbers and more time analyzing the position. For step-by-step guidance on building those memos, see our guide on writing a tax research memo and citing the IRC correctly.
Stale rates create real problems in practice. A memo citing last month's AFR for this month's loan documents incorrectly, and a Section 7520 valuation using the wrong month's rate misstates the remainder interest.
The Section 6621 rate governs interest on tax underpayments and overpayments. It's set quarterly based on the federal short-term rate plus a statutory spread: 3 percentage points for underpayments and non-corporate overpayments, 2 points for corporate overpayments, reduced to 0.5 points on the portion of a corporate overpayment exceeding $10,000. The IRS posts current figures on its quarterly interest rates page.
The Section 7872 blended annual rate, published once per year, is the shortcut rate for demand loans that maintain a constant principal balance for the full calendar year. It only applies to demand loans, not term loans.
Adjusted AFRs under Section 1288(b) apply to tax-exempt obligations and appear in the same monthly revenue ruling as the standard AFR table. For October 2026, Table 2 shows 3.23% short-term, 3.49% mid-term and 3.95% long-term at annual compounding. For November 2026, the figures are 3.54%, 3.85% and 4.18%. If you're pulling any of these figures into a memo or a client file rather than just checking them, our walkthrough on extracting tax data and drafting memos in minutes covers that workflow end to end.
The IRS publishes a new AFR revenue ruling every month. The ruling is typically released between the 15th and 20th of the month preceding its effective date. October 2026's rates came from Revenue Ruling 2026-19, released September 18. November 2026's rates came from Revenue Ruling 2026-21.
We check IRS.gov when each new ruling posts and update this page, including the Section 7520 rate and the related benchmarks above. The review date at the top of the page shows when that last happened.
Most practitioners understand what an AFR is for. The problems arise from applying last month's rate to this month's loan, missing that a term loan locks at signing while a demand loan does not, or not catching that a sale needs Section 1274 treatment instead of Section 483.
The stakes aren't abstract. A loan documented at the wrong AFR exposes the client to phantom income and gift tax consequences that proper structuring would have avoided, and a Section 7520 valuation using the wrong month's rate misstates the gift.
Run your next AFR question through Bizora and see the ruling behind the number. Start a 7-day free trial, no credit card required, or see plans and pricing if you are weighing it for your firm.
This page draws from the following IRS and statutory authorities:
Bizora AI turns hours of manual research into seconds, with every answer backed by primary source citations. Start your 7-day free trial. No credit card required.
Start Free TrialThe October 2026 AFRs are 4.25% short-term, 4.61% mid-term and 5.22% long-term, all at annual compounding, from IRS Revenue Ruling 2026-19. The Section 7520 rate is 5.6%. These apply to loans made and sales contracted in October 2026. Use the semiannual, quarterly or monthly column if the note compounds that way.
The November 2026 AFRs are 4.67% short-term, 5.08% mid-term and 5.52% long-term, all at annual compounding, from IRS Revenue Ruling 2026-21. The Section 7520 rate is 6.2%. These apply to loans made and sales contracted in November 2026, so a note signed in October still uses October's lower rates.
Short-term applies to loans or obligations of 3 years or less. Mid-term applies to terms over 3 years up to 9 years. Long-term applies to terms over 9 years. Each category has its own rate for each compounding period (annual, semiannual, quarterly, monthly).
Monthly. The IRS publishes a revenue ruling with new rates, usually between the 15th and 20th of the month before they take effect. Each ruling has its own number, and a term loan keeps the rate in effect the month it was made for its full life.
The shortfall is treated as forgone interest under Section 7872. The lender reports phantom interest income on that amount, and the same amount is recharacterized as a gift, compensation or dividend, depending on the relationship between the parties. Charging at least the AFR avoids it.
The Section 7520 rate equals 120% of the annual mid-term AFR, rounded to the nearest 0.2%. For October 2026, Revenue Ruling 2026-19 publishes that 120% figure as 5.54%, which rounds to the published 5.6%. For November 2026, it is 6.11%, which rounds to 6.2%.
Only to avoid recharacterization of principal as interest under Section 483 or Section 1274. If the sale charges adequate stated interest (generally the AFR or higher), the full stated principal is respected.
On the IRS AFR index at IRS.gov, which lists every monthly revenue ruling back to January 2000. Each ruling also appears in the weekly Internal Revenue Bulletin, which makes both sources citable in a client file or memo.
Related articles