Get Announcement 2002 - 13 - Federal Rates Adjusted Federal Rates ...

Calculation of AFR Short-term: Less than 3 years. Mid-term: 3 to 9 years. Long-term: Greater than 9 years.

A Lender should assess two main factors when selecting the appropriate IRS Applicable Federal Rate for a family loan: (1) The length of the agreed upon repayment term of the loan. (2) The IRS Applicable Federal Rate for that repayment term during the month in which the loan is made.

The Internal Revenue Service has released the Applicable Federal Rates (AFRs) for April 2023. AFRs are published monthly and represent the minimum interest rates that should be charged for family loans to avoid tax complications. The Section 7520 interest rate for April 2023 is 5.00 percent.

In the case of a demand loan, the applicable Federal rate shall be the Federal short-term rate in effect under section 1274(d) for the period for which the amount of forgone interest is being determined, compounded semiannually.

The applicable federal rate (AFR) is the minimum interest rate that the Internal Revenue Service (IRS) allows for private loans. Each month the IRS publishes a set of interest rates that the agency considers the minimum market rate for loans. 1 Any interest rate that is less than the AFR would have tax implications.

Long-term AFRs apply to loans of more than nine years. The Adjusted AFR is used to determine the compounding interest rate over a period of time. Short-term AFRs apply to loans with a maturity period of three years or less. Mid-term AFRs apply to loans of more than three years but not more than nine years.

In 1984, the Tax Reform Act set provisions for applicable federal rates (AFRs). This is a minimum tax rate that must be charged on all loans, including personal/family loans.

IRS Applicable Federal Rates (AFRs) Jan. 2024Dec. 2023Annual4.54%5.03%