The applicable federal rate (AFR) is a set of interest rates published by the IRS for federal tax purposes—not one universal rate. To find the rate relevant to a loan or other transaction, use the IRS table for the relevant month, identify the Code provision that governs the transaction, and match its term category and compounding convention. Different provisions may call for different AFR series or a separate rate.
What is the applicable federal rate?
The AFR is a family of IRS-published rates used in applying several federal tax rules. The rates appear in monthly IRS Revenue Rulings, and their purpose depends on the applicable provision of the Internal Revenue Code. For example, section 1274 uses rates in determining the issue price of certain debt instruments issued for property, while section 7872 addresses loans with below-market interest rates. A rate in one table is not automatically the right rate for another transaction.
The IRS ruling also publishes other rate tables. Adjusted AFRs are listed separately from the main AFR table, and section 7520 has its own rate for specified present-value calculations. These are related federal tax rates, but they should not be treated as interchangeable.
How to find the AFR for a particular month
- Open the IRS Revenue Ruling for the relevant month. The ruling identifies the monthly rate tables. For reference, the IRS published September 2026 rates in Internal Revenue Bulletin 2026-37, Rev. Rul. 2026-17, and August 2026 rates in Internal Revenue Bulletin 2026-32, Rev. Rul. 2026-13.
- Identify the governing Code section and transaction. Determine which statutory rule applies before choosing a table. The ruling includes rate entries associated with multiple provisions, including sections 1274, 1288, 382, 7872, 42, 280G, 467, 468, 482, 483, and 7520.
- Choose the term category and compounding period the rule requires. The main table distinguishes short-, mid-, and long-term AFRs and shows annual, semiannual, quarterly, and monthly compounding columns.
- Check whether the provision calls for adjusted AFR or another separate rate. Do not substitute the main AFR table for a separately published series such as adjusted AFR or the section 7520 rate.
- Verify the governing text and transaction facts. The applicable provision, facts, and any relevant elections or exceptions affect the result. The IRS cautions that later legislation, regulations, court decisions, rulings, and procedures may affect how a published ruling applies.
Short-term, mid-term, and long-term AFR
These labels identify term categories in the IRS tables; they do not by themselves determine which category applies to a particular loan or transaction. The controlling rule and the transaction’s facts determine the relevant category. The monthly tables then provide rates under each category for different compounding periods.
What’s actually slowing this PC down?
Pick the symptom - the matching free tool is one click away.
#1 Best Overall
For illustration, the September 2026 ruling lists the following main-table rates with annual compounding:
| Term category | Annual-compounding AFR |
|---|---|
| Short-term | 4.18% — IRS, September 2026 ruling |
| Mid-term | 4.49% — IRS, September 2026 ruling |
| Long-term | 5.12% — IRS, September 2026 ruling |
These are dated examples, not permanent rates. In the August 2026 ruling, the annual-compounding figures were 4.10% short-term, 4.35% mid-term, and 4.92% long-term. The comparison shows why a quoted AFR should always identify its month and compounding convention.
Does the AFR change monthly?
The IRS publishes month-specific AFR tables in Revenue Rulings, so the relevant month matters and figures can differ from one ruling to another. For example, the September 2026 ruling lists a 5.40% section 7520 rate; that is a separate rate for specified present-value calculations, not one of the annual-compounding AFR figures above. Check the IRS ruling for the month relevant to the transaction rather than assuming a rate from another month applies.
Which AFR applies to a family loan?
There is no single family-loan AFR that can be selected without knowing how the loan is treated under the tax rules. Section 7872 addresses below-market-interest loans, but the applicable rate and calculation depend on the governing law and the loan’s facts. A general rate table cannot determine the tax treatment of an individual family loan by itself.
Before using a rate, identify the relevant Code provision, date or period, term category, and compounding method. The September 2026 ruling provides tables associated with several Code sections; the presence of a rate entry does not establish that it applies to a particular loan. Consult the controlling Code and regulations, or a qualified tax professional, when applying the rules to a specific arrangement.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why AFR figures need context
A useful AFR citation includes the month, Code provision, term category, compounding convention, and whether the figure comes from the main table, adjusted AFR table, or another provision-specific series. Leaving out any of these can make two different rates appear comparable when they serve different purposes.
The IRS describes the Internal Revenue Bulletin as “the authoritative instrument of the Commissioner of Internal Revenue” for announcing official IRS rulings and procedures and publishing other specified materials. It also cautions that later legal developments must be considered when applying published rulings, and that conclusions should not automatically be carried over to cases with different facts. See the introduction to Internal Revenue Bulletin 2026-37.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
