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 November 2026 (Rev. Rul. 2026-21), the short-term AFR (≤3-year loans) is 4.67% annual compounding, the mid-term AFR (>3 to ≤9 years) is 5.08%, and the long-term AFR (>9 years) is 5.52%. All three compound differently at semiannual, quarterly, and monthly periods — the full November 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 one of the two figures that cap the interest rate for the fixed amortization and fixed annuitization methods of a 72(t) Substantially Equal Periodic Payment (SEPP) plan: the rate may be no more than the greater of 5% or 120% of the federal mid-term rate for either of the two months before distributions begin (IRS Notice 2022-6) — for November 2026 the 120% figure is 6.11%. 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. For a gift loan or a demand loan made interest-free or below the AFR, the "forgone interest" is treated as if you transferred it to the borrower (a gift, when the loan is a gift loan) and the borrower paid it back to you as interest, so you report that imputed interest as income each year. Other below-market term loans are instead treated as having original issue discount equal to the amount lent less the present value of the required payments, and for gift tax a gift loan made for a fixed term is measured the same up-front way. For a gift loan directly between individuals, §7872 does not apply on any day their aggregate outstanding loans are $10,000 or less (unless the loan funds income-producing assets), and for income tax the imputed interest is capped at the borrower's net investment income while the aggregate is $100,000 or less (unless tax avoidance is a principal purpose), and net investment income of $1,000 or less counts as zero, so no interest income is imputed to the lender for that year. 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 November 2026 that's 6.11% rounded to 6.20%.

Every month. The IRS publishes a new Revenue Ruling — November 2026's is Rev. Rul. 2026-21 — 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.