IRS Interest Rate 2026: Current Rate on Unpaid Taxes
Last reviewed by Calculus Tax in-house Settlement Officer
The IRS charges 7% interest on unpaid tax for the fourth quarter of 2026 (October through December). The rate is the federal short-term rate plus 3 percentage points, set every quarter and compounded daily. It applies to unpaid tax, penalties, and interest until the balance is paid in full.
Quick answer
The IRS charges 7% interest on unpaid tax for the fourth quarter of 2026 (October through December). It was 7% in the first and third quarters and 6% in the second quarter of 2026. The rate is the federal short-term rate plus 3 percentage points, set quarterly and compounded daily, and applies until the balance is paid in full.
| Q4 2026 underpayment rate | 7% |
|---|---|
| Q3 / Q2 / Q1 2026 | 7% / 6% / 7% |
| Formula | Federal short-term rate plus 3 percentage points |
| Compounding | Daily |
| Large corporate underpayment (Q4 2026) | 9% |
| Individual overpayment rate (Q4 2026) | 7% |
The Current IRS Underpayment Rate
For the fourth quarter of 2026 (October through December), the IRS underpayment rate for individuals and corporations is 7%. The rate was 7% in the first quarter, 6% in the second quarter, and 7% in the third quarter of 2026.
How the Rate Is Set
The standard underpayment rate is the federal short-term rate plus 3 percentage points. The IRS sets and publishes it quarterly. A rate change does not change the interest charged for prior quarters or years.
Interest Compounds Daily
IRS interest is compounded daily, meaning each day's interest is figured on the previous day's balance plus interest. Interest accrues on unpaid tax, penalties, and interest until the balance is paid in full, which is why paying even part of a balance early reduces total cost.
Rates in Recent Years
The underpayment rate was 7% for every quarter of 2025 and 8% for every quarter of 2024. In 2021 it was 3% all year. Because the rate moves with the federal short-term rate, the cost of carrying an IRS balance changes over time.
Large Corporate Underpayments
C corporations with underpayments of more than $100,000 pay the large corporate underpayment rate, the federal short-term rate plus 5 percentage points, which was 9% for the fourth quarter of 2026.
Interest Is Separate From Penalties
Interest is in addition to the failure-to-pay penalty of 0.5% per month (generally 0.25% during an approved installment agreement if the return was filed on time) and the failure-to-file penalty. Interest is also charged on penalties, and when a penalty is removed, the related interest is reduced or removed too. See IRS payment plan fees and interest.
If the IRS Owes You
The IRS also pays interest on overpayments. For individuals, the overpayment rate is the federal short-term rate plus 3 percentage points, which was 7% for the fourth quarter of 2026. Corporate overpayments earn a lower rate.
How to Limit IRS Interest
Pay as much as you can now, set up a payment plan for the rest, and ask about penalty relief, which also removes the related interest. Self-employed taxpayers can avoid future estimated tax penalties, which are figured with this same rate; see the estimated tax penalty. Contact us for a review of your balance.
Frequently Asked Questions
What is the IRS interest rate right now?
7% for the fourth quarter of 2026 (October through December) on underpayments by individuals and corporations.
How is the IRS interest rate calculated?
The federal short-term rate plus 3 percentage points, set quarterly and compounded daily.
Does IRS interest compound?
Yes, daily. Each day's interest is figured on the prior day's balance plus interest.
Does the IRS charge interest on penalties?
Yes. And if a penalty is reduced or removed, the related interest is reduced or removed too.
Does a payment plan stop interest?
No. Interest continues until the balance is paid in full, though the failure-to-pay penalty is generally reduced during an approved plan.
How can I reduce the interest I owe the IRS?
Pay as much as you can as soon as you can, since interest compounds daily on the balance. When a penalty is reduced or removed, the IRS also reduces or removes the related interest.
What can change the answer
Notice type, issue date, filing history, account status, deadlines, and current agency procedures can change the available next step. Bring the complete notice and account records to a qualified review.
Tax rules and collection procedures can change and depend on the account. Federal claims should be checked against current IRS guidance; California claims should be checked against the California Franchise Tax Board. See our editorial methodology for sourcing and update standards.
Results depend on your facts and on IRS or state decisions. Calculus Tax, Inc. is not affiliated with the IRS or any government agency.
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