On Aug. 21, 2026, the IRS announced that its interest rates will stay the same for the calendar quarter that began Oct. 1, 2026 (IRS news release IR-2026-98). The rates are formally set in Revenue Ruling 2026-15.
Rates for Oct. 1 – Dec. 31, 2026
| Category | Annual rate |
|---|---|
| Underpayments (tax owed but not paid), individuals and corporations | 7% |
| Overpayments (refunds the IRS owes), individuals | 7% |
| Overpayments, corporations | 6% |
| Part of a corporate overpayment above $10,000 | 4.5% |
| Large corporate underpayments | 9% |
Interest is compounded daily, so it is charged on earlier interest as well as on the tax.
How the rate is set
By law, the IRS resets interest rates every quarter. For individuals and other non-corporate taxpayers, both the underpayment and overpayment rates equal the federal short-term rate plus 3 percentage points. The fourth-quarter rates were computed from the federal short-term rate set during July 2026.
How 2026 has looked
The IRS's quarterly interest rate page shows that the individual rate wasn't 7% all year:
| 2026 quarter | Individual underpayment and overpayment rate |
|---|---|
| January – March | 7% |
| April – June | 6% |
| July – September | 7% |
| October – December | 7% |
If you're checking interest on a 2026 notice, the rate depends on which days the balance was unpaid.
Example. You owe $5,000 of tax that stays unpaid for 90 days during the fourth quarter of 2026. At 7% a year compounded daily, interest for that period is about $87.04. That doesn't include any failure-to-pay penalty, which is figured separately.
What this means if you owe
Interest runs from the original due date of the return until the balance is paid in full. That includes time on a payment plan or under an extension. An extension gives you more time to file, not to pay. You can't have interest removed just because paying is hard. But when a penalty is removed, the IRS automatically reduces or removes the interest charged on that penalty. Under the new Automatic Exemption from Penalty, people with a clean three-year record aren't charged failure-to-file or failure-to-pay penalties at all on eligible returns.
Paying even part of what you owe now lowers the daily interest. If you can't pay in full, a payment plan stops most collection action, but interest keeps running. See how IRS interest works, IRS payment plans and IRS penalty relief. To estimate penalties and interest on your own balance, try our penalty and interest calculator.
What this means if you're owed a refund
When the IRS pays interest on a late refund, the same 7% individual rate applies for this quarter. Interest the IRS pays you is generally taxable, and the IRS reports it to you.
Frequently asked questions
Will the rate change in January 2027?
It might. The IRS sets each quarter's rate from the federal short-term rate and usually announces the next quarter's rates several weeks ahead. Check the IRS quarterly interest rates page or your notice for the rate that applies.
Why does my notice show more interest than 7% of my balance?
Interest compounds daily and runs from the original due date. It is also charged on penalties. A balance that's been open more than a year, or that includes penalties, will show more than a simple 7%.
Is IRS interest the same as the failure-to-pay penalty?
No. Interest is charged on unpaid tax under the quarterly rate. The failure-to-pay penalty is a separate charge figured on the unpaid tax for each month or part of a month it stays unpaid.
Sources
IRSV.com is an independent guide and is not affiliated with the IRS. This page is general information, not tax or legal advice. Rules change; confirm details on IRS.gov or with a tax professional. Found an error? Tell us.
