Taxpayers carrying an unpaid federal tax balance will continue facing a 7% annual interest rate through the end of 2026.
The Internal Revenue Service announced August 21 that interest rates will remain unchanged for the calendar quarter beginning October 1, 2026. For individuals, both tax underpayments and overpayments will carry a 7% annual rate, compounded daily.
That means taxpayers who owe the IRS should not expect interest costs to become cheaper during the final three months of the year. On the other hand, taxpayers entitled to interest on certain delayed refunds will continue receiving the same 7% rate.
What the 7% IRS Interest Rate Means for Taxpayers
Interest can become important when someone files a tax return but cannot immediately pay the entire balance due. The IRS generally charges interest on unpaid taxes, and because that interest compounds daily, delaying payment can steadily increase the amount owed.
The fourth-quarter rate applies from October 1 through December 31, 2026. The IRS calculates rates quarterly, so the percentage can rise or fall in subsequent quarters depending on changes in the federal short-term rate.
For taxpayers other than corporations, the underpayment and overpayment rates are calculated using the federal short-term rate plus three percentage points. The IRS said the fourth-quarter rates were based on the federal short-term rate determined during July 2026.
The Rate Isn’t Increasing From the Previous Quarter
The announcement does not represent a new increase for taxpayers. Individual overpayments and underpayments were already subject to a 7% rate during the third quarter of 2026, covering July through September.
That distinction may be useful for consumers who see headlines about a “7% IRS interest rate” and assume a new increase is taking effect in October. Instead, the agency is maintaining its existing rate.
IRS rates have moved during 2026. The individual rate was 7% during the first quarter, fell to 6% for the second quarter and returned to 7% for the third quarter before remaining there for the fourth.
Overpayments Can Earn Interest Too
Interest does not work exclusively against taxpayers. The IRS can also pay interest on qualifying overpayments when taxpayers have paid more than they owe and the government does not issue the refund within the applicable time period.
For individuals, the fourth-quarter overpayment rate will also remain 7% annually, compounded daily. However, taxpayers should not interpret that as meaning every tax refund automatically earns 7% interest. Whether interest is owed depends on the circumstances and timing surrounding the refund.
The IRS describes an overpayment as a payment made in excess of the amount owed.
Corporations Have Different Interest Rates
Businesses should pay attention to a separate set of numbers. For the fourth quarter, the corporate overpayment rate will be 6%, while the rate on the portion of a corporate overpayment exceeding $10,000 for a taxable period will be 4.5%.
The general underpayment rate remains 7%, while large corporate underpayments are subject to a substantially higher 9% rate.
These differences result from formulas established under the Internal Revenue Code. Generally, corporate overpayments use the federal short-term rate plus two percentage points, while large corporate underpayments use the federal short-term rate plus five percentage points.
Owing the IRS Can Become More Expensive the Longer You Wait
For households, the practical takeaway is straightforward: a tax balance that remains unpaid can continue accumulating interest even though the fourth-quarter rate isn’t increasing.
Taxpayers who discover they owe money after filing should therefore avoid assuming that waiting until the next quarter will automatically produce a lower interest rate. IRS rates are recalculated quarterly, and future rates can move in either direction.
The complete fourth-quarter calculations are contained in Revenue Ruling 2026-15, which the IRS says will appear in Internal Revenue Bulletin 2026-36 dated August 31, 2026. Taxpayers who need information about their own balances, payment options or interest charges can use IRS.gov or consult a qualified tax professional.
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Amanda Blankenship is the Chief Editor for District Media. With a BA in journalism from Wingate University, she frequently writes for a handful of websites and loves to share her own personal finance story with others. When she isn’t typing away at her desk, she enjoys spending time with her daughter, son, husband, and dog. During her free time, you’re likely to find her with her nose in a book, hiking, or playing RPG video games.
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