Applicable Federal Rate (AFR) 2026: Every Month and the Rules
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Quick Answer
The applicable federal rate (AFR) for October 2026 is 4.25% for loans of up to 3 years (short-term), 4.61% for loans over 3 and up to 9 years (mid-term) and 5.22% for loans over 9 years (long-term), with annual compounding (Rev. Rul. 2026-19). With the compounding the statute uses for a family loan, semiannual, the same rates are 4.21%, 4.56% and 5.15%. The IRS posts a new ruling each month; as of October 12, 2026 the newest on its AFR page is October’s, and no November ruling is in the IRS folder yet. The mid-term rate rose from 3.81% in January to 4.61% in October (our arithmetic, 0.80 points). The same ruling sets the section 7520 rate, used to value annuities and remainders, at 5.6% for October, which is 120% of the mid-term rate rounded to the nearest 0.2. Which month’s rate you use depends on the transaction: a sale takes the lowest of three months (26 U.S.C. 1274(d)(2)); a term loan takes the rate for the day it is made (7872(f)(2)(A)).
Key Takeaways
- October 2026 AFR, annual compounding: short-term 4.25%, mid-term 4.61%, long-term 5.22% (Rev. Rul. 2026-19). Semiannual: 4.21%, 4.56%, 5.15%.
- All three rates rose through 2026: short-term from 3.63% in January, mid-term from 3.81%, long-term from 4.63%; changes of 0.62, 0.80 and 0.59 points (our arithmetic from ten revenue rulings).
- Two rules choose the month. A sale or exchange uses the lowest AFR of the 3 calendar months ending with the month of the binding written contract (1274(d)(2)). A below-market term loan, including a family loan, uses the rate in effect on the day the loan was made, compounded semiannually (7872(f)(2)(A)); there is no 3-month look-back in that text.
- Family loans: 26 U.S.C. 7872(c)(2)(A) switches the gift-loan rules off on days when loans between two individuals total $10,000 or less (not for loans used to buy income-producing assets), and 7872(d)(1) caps the income-tax interest at the borrower’s net investment income when the total is $100,000 or less, with net investment income of $1,000 or less treated as zero.
- Our arithmetic: a $200,000 loan with no interest, repaid in one payment after 5 years, made in October 2026, has a present value of $159,633.05 at 4.56%, so $40,366.95 of the loan is forgone interest. The 2026 annual gift tax exclusion is $19,000 per recipient (Rev. Proc. 2025-32).
- The section 7520 rate for each month of 2026 is 120% of that month’s mid-term AFR, rounded to the nearest 0.2%: 4.6% in January, 5.0% in May, 5.6% in October.
CSV · 194 rows
Applicable federal rates January-October 2026, section 7520 rates, the 2026 blended annual rate and the statutory thresholds of sections 7872, 1274, 483, 1274A and 7520
194 rows: short-, mid- and long-term AFR in annual, semiannual, quarterly and monthly compounding from the ten 2026 IRS revenue rulings; the 120% mid-term rate and the section 7520 rate of each month; the 2026 blended annual rate (3.82%, Rev. Rul. 2026-12); lowest 3-month rates for March-October contracts (our arithmetic); and the thresholds of 26 U.S.C. 7872, 1274, 483, 1274A, 7520, Rev. Proc. 2025-32 and 26 CFR 1.7872-5, each with its source URL.
The October 2026 rates, and what the AFR is
The AFR is not a market quote and not a mortgage rate. The IRS sets it from Treasury yields and publishes it as a revenue ruling each month. Section 1274(d)(1) says the Secretary shall “determine the Federal short-term rate, mid-term rate, and long-term rate which shall apply during the following calendar month”, based on the average market yield during a one-month period on “outstanding marketable obligations of the United States”. Rev. Rul. 2026-19 describes itself as providing “various prescribed rates for federal income tax purposes for October 2026 (the current month).” The tier follows the term of the debt: short-term for not over 3 years, mid-term for over 3 and not over 9, long-term for over 9 (1274(d)(1)(A)).
| October 2026 AFR (Rev. Rul. 2026-19) | Annual | Semiannual | Quarterly | Monthly |
|---|---|---|---|---|
| Short-term (up to 3 years) | 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% |
The ruling also lists 110%, 120%, 130%, 150% and 175% versions of the AFR. For October 2026 the mid-term 120% rate is 5.54% annual and the 150% rate is 6.96%. Those multiples are written into other sections of the Code: for example, section 1274(e)(1) uses “110 percent of the applicable Federal rate, compounded semiannually” when a seller leases back part of the property sold.
January to October 2026, month by month
Every figure below is read from the monthly revenue ruling, Table 1 for the AFR and Table 5 for the section 7520 rate. The last two columns show how the 7520 rate is derived: 120% of the mid-term AFR, rounded to the nearest 0.2% (our arithmetic for the rounding; the statute is quoted further down).
| Month (revenue ruling) | Short-term, annual | Mid-term, annual | Long-term, annual | 120% of mid-term | Section 7520 rate |
|---|---|---|---|---|---|
| January 2026 (Rev. Rul. 2026-2) | 3.63% | 3.81% | 4.63% | 4.57% | 4.6% |
| February 2026 (Rev. Rul. 2026-3) | 3.56% | 3.86% | 4.70% | 4.63% | 4.6% |
| March 2026 (Rev. Rul. 2026-6) | 3.59% | 3.93% | 4.72% | 4.72% | 4.8% |
| April 2026 (Rev. Rul. 2026-7) | 3.59% | 3.82% | 4.62% | 4.59% | 4.6% |
| May 2026 (Rev. Rul. 2026-9) | 3.82% | 4.08% | 4.83% | 4.91% | 5.0% |
| June 2026 (Rev. Rul. 2026-11) | 3.85% | 4.13% | 4.87% | 4.97% | 5.0% |
| July 2026 (Rev. Rul. 2026-12) | 4.00% | 4.35% | 4.98% | 5.23% | 5.2% |
| August 2026 (Rev. Rul. 2026-13) | 4.10% | 4.35% | 4.92% | 5.23% | 5.2% |
| September 2026 (Rev. Rul. 2026-17) | 4.18% | 4.49% | 5.12% | 5.40% | 5.4% |
| October 2026 (Rev. Rul. 2026-19) | 4.25% | 4.61% | 5.22% | 5.54% | 5.6% |
Source: IRS revenue rulings 2026-2, 2026-3, 2026-6, 2026-7, 2026-9, 2026-11, 2026-12, 2026-13, 2026-17 and 2026-19, read from irs.gov on October 12, 2026. Each ruling says which month it covers; one oddity: the IRS’s own AFR list page, last reviewed August 8, 2026, labels Rev. Rul. 2026-11 as May, but the ruling itself is for June, and the list did not yet show 2026-9 or 2026-17. Use the ruling number and the month printed inside it.
Three things stand out. Rates moved little in the first four months (mid-term 3.81%, 3.86%, 3.93%, 3.82%) and then rose in every month except August, when the mid-term rate was unchanged at 4.35% and the long-term rate fell from 4.98% to 4.92%. And in a rising year the October figures are the highest of the year in every tier, so a borrower who documented a family loan in January used a rate 0.80 points lower on the mid-term than one documenting it now.
November 2026. Section 1274(d)(1)(B) has the rates for a month determined during the month before. As of October 12, 2026 the IRS AFR page lists Rev. Rul. 2026-19 as the newest, and the next numbers in the IRS folder (rr-26-21 to rr-26-23) do not exist. Rev. Rul. 2026-20, the number in between, is a ruling on a different subject (section 1001 and exchange traded funds). The November ruling, when it appears, will replace the October rates for loans made in November.
Which month’s rate: four rules, four answers
The most common mistake in the search results is to give one AFR for “now”. The Code picks the month differently depending on the transaction:
| Transaction | Which rate | Compounding | Source |
|---|---|---|---|
| Sale of property for a note (seller financing) | Lowest of the AFRs for the 3 calendar months ending with the first month of a binding written contract | The note’s payment period; the discount rate is the AFR compounded semiannually | 26 U.S.C. 1274(d)(2); 1274(b)(2)(B) |
| Term loan that is below market (family loan with a fixed maturity) | The AFR in effect on the day the loan was made | Semiannual | 26 U.S.C. 7872(f)(2)(A) |
| Demand loan (repayable at any time on the lender’s demand) | The Federal short-term rate for the period for which forgone interest is being measured | Semiannual | 26 U.S.C. 7872(f)(2)(B); the IRS also posts a 2026 blended annual rate of 3.82% (Rev. Rul. 2026-12, Table 6) |
| Valuing an annuity, life or term interest, or remainder (section 7520) | 120% of the Federal midterm rate for the month of the valuation date; for charitable transfers the taxpayer may use either of the 2 preceding months | Annual, rounded to nearest 0.2% | 26 U.S.C. 7520(a) |
For a sale, the three-month rule matters in a year like 2026 when rates rise. These are the lowest annual-compounding AFRs a seller note could use for a contract signed in each month (our arithmetic over the rulings):
| Contract signed in | Lowest short-term | Lowest mid-term | Lowest long-term |
|---|---|---|---|
| March 2026 (looks at Jan-Mar) | 3.56% | 3.81% | 4.63% |
| April 2026 (looks at Feb-Apr) | 3.56% | 3.82% | 4.62% |
| May 2026 (looks at Mar-May) | 3.59% | 3.82% | 4.62% |
| June 2026 (looks at Apr-Jun) | 3.59% | 3.82% | 4.62% |
| July 2026 (looks at May-Jul) | 3.82% | 4.08% | 4.83% |
| August 2026 (looks at Jun-Aug) | 3.85% | 4.13% | 4.87% |
| September 2026 (looks at Jul-Sep) | 4.00% | 4.35% | 4.92% |
| October 2026 (looks at Aug-Oct) | 4.10% | 4.35% | 4.92% |
A contract signed in October 2026 can use August’s mid-term 4.35% rather than October’s 4.61%. That choice is open to a sale; the text of 7872(f)(2)(A) for a loan does not provide for it. We cover the seller-note side, with the installment-sale rules and Regulation Z, on our seller financing page, and do not repeat it here.
The semiannual column is the one a family term loan is tested against. The rate for a loan made in each month of 2026:
| Loan made in | Short-term, semiannual | Mid-term, semiannual | Long-term, semiannual |
|---|---|---|---|
| January 2026 | 3.60% | 3.77% | 4.58% |
| February 2026 | 3.53% | 3.82% | 4.65% |
| March 2026 | 3.56% | 3.89% | 4.67% |
| April 2026 | 3.56% | 3.78% | 4.57% |
| May 2026 | 3.78% | 4.04% | 4.77% |
| June 2026 | 3.81% | 4.09% | 4.81% |
| July 2026 | 3.96% | 4.30% | 4.92% |
| August 2026 | 4.06% | 4.30% | 4.86% |
| September 2026 | 4.14% | 4.44% | 5.06% |
| October 2026 | 4.21% | 4.56% | 5.15% |
A loan to a family member: section 7872 in the statute’s words
Section 7872 applies when a loan charges less than the AFR. A “below-market loan” is, for a demand loan, one where “interest is payable on the loan at a rate less than the applicable Federal rate”, and for a term loan one where “the amount loaned exceeds the present value of all payments due under the loan” (7872(e)(1)). A “gift loan” is “any below-market loan where the forgoing of interest is in the nature of a gift” (7872(f)(3)). The statute then treats the missing interest as if the lender had given it to the borrower and the borrower had paid it back as interest (7872(a)(1)), on “the last day of such calendar year” for a loan outstanding over the year (7872(a)(2)). For a term loan that is a gift, the gift-tax side is different: “subsection (b)(1) (and not subsection (a)) shall apply for purposes of chapter 12” (7872(d)(2)), meaning the lender is treated as transferring, on the date the loan was made, the excess of the amount loaned over the present value of the payments (7872(b)(1)). The present value uses a discount rate equal to the AFR (7872(f)(1)).
The limits that matter for a family loan:
| Limit | What the statute says | Source |
|---|---|---|
| $10,000 de minimis | For a gift loan directly between individuals, the section does not apply to any day when the total outstanding loans between them does not exceed $10,000. Not available for a loan directly attributable to buying or carrying income-producing assets. | 26 U.S.C. 7872(c)(2)(A)-(B) |
| $100,000 and net investment income | For income tax, the interest treated as retransferred in a year cannot exceed the borrower’s net investment income for the year; the cap stops applying on any day when total loans between the two exceed $100,000, and also if a principal purpose is tax avoidance. | 26 U.S.C. 7872(d)(1)(A), (B), (D) |
| $1,000 of net investment income | If the borrower’s net investment income does not exceed $1,000, it is treated as zero. | 26 U.S.C. 7872(d)(1)(E)(ii) |
| Spouses | A husband and wife are treated as one person. | 26 U.S.C. 7872(f)(7) |
| Tax avoidance | The section applies to any below-market loan one of whose principal purposes is avoiding federal tax. | 26 U.S.C. 7872(c)(1)(D) |
| Loans covered by 483 or 1274 | Section 7872 does not apply to a loan to which section 483, 643(i) or 1274 applies; a seller note is tested under those sections instead. | 26 U.S.C. 7872(f)(8) |
| Charity gift loans | Exempt if the lender’s total outstanding gift loans to the organization never exceed $250,000 in the year. | 26 CFR 1.7872-5T(b)(9) |
Two details are easy to miss. The $100,000 rule limits income tax (the statute opens “For purposes of subtitle A”); the gift-tax treatment of a term loan in 7872(d)(2) is a separate sentence, so the cap on interest does not by its words reduce the gift computed under (b)(1) (our reading). And the $10,000 and $100,000 figures are written in dollars in the statute and are not indexed in the text, unlike the 1274A limits below.
What a zero-interest family loan costs, in numbers (our arithmetic)
The two examples use only the October 2026 rates above and the statute’s formulas; they are illustrations, not a computation for any return.
| Example | Inputs | Result |
|---|---|---|
| Term loan | $200,000 lent in October 2026, no interest, repaid in one payment after 5 years (mid-term tier); AFR 4.56% compounded semiannually | Present value $159,633.05; amount loaned minus present value $40,366.95, which is the gift measured at the loan date under 7872(b)(1) and (d)(2), against a 2026 annual exclusion of $19,000 per recipient |
| Demand loan | $150,000 outstanding all of 2026 with no interest; blended annual rate 3.82% | Forgone interest of about $5,730 for the year; $90,000 outstanding would give about $3,438 |
The $40,366.95 is about 20% of the loan. In the statute’s test it would be zero if the payments due under the note, discounted at the AFR compounded semiannually, were worth at least the $200,000 lent (our reading); whether a particular note passes depends on its payments, which is a question for the person drafting it. The gift tax annual exclusion and Form 709 are covered on our annual gift tax exclusion page, and the exemption amounts on our estate tax exemption page.
Sale notes, in brief: 1274, 483 and 1274A
When property is sold for a note, section 1274 imputes interest at the AFR if the stated interest is too low, and section 483 does the same for contracts outside 1274. A few figures set the edges, all from the statutes and the 2026 inflation notice:
| Rule | Figure | Source |
|---|---|---|
| Section 1274 does not apply if total payments and other consideration are | $250,000 or less (section 483 can still apply) | 26 U.S.C. 1274(c)(3)(C) |
| Sale of principal residence by an individual | Outside section 1274 | 26 U.S.C. 1274(c)(3)(B) |
| Payments due more than | 6 months after the sale to be covered by 1274 | 26 U.S.C. 1274(c)(1)(B) |
| Discount rate cap for a qualified debt instrument | 9%, compounded semiannually | 26 U.S.C. 1274A(a) |
| Qualified debt instrument, stated principal (2026) | Not over $7,462,600 | 26 U.S.C. 1274A(b); Rev. Proc. 2025-32, section 4.40 |
| Cash-method election, stated principal (2026) | Not over $5,330,500 | 26 U.S.C. 1274A(c)(2); Rev. Proc. 2025-32, section 4.40 |
| Land sold to a family member | Rate capped at 6% on up to $500,000 of sales a year between the same individuals | 26 U.S.C. 483(e)(1), (e)(3) |
| Price that cannot exceed | $3,000: section 483 does not apply | 26 U.S.C. 483(d)(2) |
The statute’s own 1274A figure is $2,800,000 before indexing; the 2026 limit is the indexed number, and section 1274A(d)(2) is the indexing rule.
The section 7520 rate: where the “120%” comes from
Section 7520(a) says the value of “any annuity, any interest for life or a term of years, or any remainder or reversionary interest” is determined by tables and “an interest rate (rounded to the nearest 2/10ths of 1 percent) equal to 120 percent of the Federal midterm rate in effect under section 1274(d)(1) for the month in which the valuation date falls.” So the 7520 rate is not a separate market rate; it moves with the mid-term AFR. In 2026 it went from 4.6% in January to 5.6% in October. Two months show the rounding: May’s 120% figure of 4.91% became 5.0%, and October’s 5.54% became 5.6%. Where an income, estate or gift tax charitable contribution is allowable for any part of the property, the taxpayer may elect to use the midterm rate of either of the 2 preceding months (7520(a)). How the rate drives a charitable remainder trust is on our charitable remainder trust page.
What this page cannot tell you
- Whether a loan is a gift loan. That turns on intent and facts. The statute defines it by whether the forgoing of interest is “in the nature of a gift”, and a loan between relatives can also be a compensation-related, corporation-shareholder or tax-avoidance loan with different rules (7872(c)(1)).
- How your note is built. Balloon payments, interest-only periods, forgiveness, security and state law change the present-value result. The AFR is a floor in the tax computation, not the rate a bank or a state usury law would set.
- Gift tax returns and estate effects. Whether a gift needs a Form 709, how a forgiven note is treated, and what remains in an estate are questions for a tax adviser who has the documents (7872(i)(2) leaves estate-tax coordination to regulations).
- Other exemptions. The Treasury’s list in 26 CFR 1.7872-5T(b) exempts, among others, loans available to the general public on the same terms, bank deposits and loans on which the interest arrangements have no significant effect on federal tax; read the full list before relying on a category.
What a reader can do with this
- Find the right ruling: open the revenue ruling for the month the loan or contract falls in (irs.gov/pub/irs-drop/rr-26-XX.pdf) and read the Table 1 line for the tier and compounding you need. Our CSV lists all ten 2026 rulings.
- Match the tier to the term: a note due in 3 years or less is short-term; over 3 and up to 9 years is mid-term; longer is long-term (1274(d)(1)(A)). The option to renew or extend counts in the term (1274(d)(3)).
- Write down the date and the source: the loan date for a term loan, or the contract date for a sale, decides the month; keep the ruling number with the note.
- Check the thresholds first: many small family loans fall under the $10,000 or $100,000 levels in 7872(c) and (d), but the exceptions (investment use, tax avoidance, more than $100,000 between the same two people) are in the same paragraphs.
- Get the numbers run by a CPA or a tax attorney.
This is analysis of public documents, not investment, legal or tax advice.
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When a rate, rule or filing behind this page changes: what changed, the one number that matters, and the source to check it yourself.
Sources, read and saved on October 12, 2026: IRS Revenue Rulings 2026-2, 2026-3, 2026-6, 2026-7, 2026-9, 2026-11, 2026-12, 2026-13, 2026-17 and 2026-19 (irs.gov/pub/irs-drop) and the IRS Applicable Federal Rates page (irs.gov/applicable-federal-rates); Rev. Rul. 2026-20 (title page only); Rev. Proc. 2025-32 (irs.gov); 26 U.S.C. 483, 1274, 1274A, 7520 and 7872, United States Code 2024 edition, Government Publishing Office (govinfo.gov); 26 CFR 1.7872-5 and 1.7872-5T (eCFR, current to September 30, 2026). Computations marked “our arithmetic” come from the script calc.py over the parsed rulings. Statute text is the 2024 edition; we did not check later amendments to these sections. This is analysis of public documents, not investment, legal or tax advice.
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