Applicable Federal Rates (AFR)

The AFR is the minimum interest rate the IRS treats as "adequate stated interest" on a private loan or seller-financed sale each month, published monthly by Revenue Ruling under IRC §1274(d). Charge less than the applicable AFR on a loan between related parties (family, a trust, a closely-held business) and the IRS can impute interest at the AFR anyway — taxing the lender on interest income that was never actually paid, and in some cases treating the shortfall as a gift under §7872.

For August 2026 (Rev. Rul. 2026-13), the short-term AFR (≤3-year loans) is 4.10% annual compounding, the mid-term AFR (>3 to ≤9 years) is 4.35%, and the long-term AFR (>9 years) is 4.92%. All three compound differently at semiannual, quarterly, and monthly periods — the full August 2026 table above shows every column.

The three AFR terms are set by loan/instrument length, not by any dollar amount: short-term covers obligations of 3 years or less, mid-term covers obligations of more than 3 years but not more than 9 years, and long-term covers obligations of more than 9 years. A 5-year family loan uses the mid-term AFR; a 15-year seller-financed home sale uses the long-term AFR.

120% of the mid-term AFR is the interest-rate ceiling for the fixed amortization and fixed annuitization methods of a 72(t) Substantially Equal Periodic Payment (SEPP) plan (IRS Notice 2022-6) — for August 2026 that ceiling is 5.23%. Model all three SEPP methods side by side on the 72(t) SEPP calculator.

Under IRC §7872, a below-market loan between family members (or any related parties) is measured against the AFR for the loan's term. If you lend money interest-free or below the AFR, the IRS treats the "foregone interest" as if you'd charged the AFR and received it back as a gift (for a demand or gift loan) or as imputed interest income (for a term loan). There's a $10,000 aggregate de minimis exception for most gift loans, and a reduced imputed-interest rule (capped at the borrower's net investment income) for loans up to $100,000. Check how a below-market loan interacts with your annual exclusion on the gift tax calculator.

The §7520 rate values annuities, life estates, remainders, and reversionary interests — the number that drives GRATs, charitable remainder and lead trusts (CRTs/CLTs), and qualified personal residence trusts. By statute it equals 120% of the mid-term AFR (annual compounding), rounded to the nearest two-tenths of one percent. For August 2026 that's 5.23% rounded to 5.20%.

Every month. The IRS publishes a new Revenue Ruling — August 2026's is Rev. Rul. 2026-13 — typically in the middle of the prior month, covering short-term, mid-term, and long-term rates at four compounding periods plus the §7520 rate. There is no annual "AFR for the year" — always use the rate published for the specific month your loan, sale, or valuation is tested against.

The trailing-12-month table above covers the most recent year of published rates. For anything older, the IRS maintains a full index of every AFR revenue ruling back to the 1980s at irs.gov/applicable-federal-rates.