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IRS interest rates for 2026
The rate the IRS charges on unpaid tax and pays on late refunds, set each quarter and compounded every day.
Interest the IRS charges on a balance
Interest owed
$176
$29 a month on average
- Balance with interest$5,176
- Simple interest for comparison$173
Rate = federal short-term rate + 3 points, reset every quarter, compounded daily. Penalties are added separately and also bear interest.
The IRS charges interest on tax paid after its due date, and pays interest on some refunds, at a rate it resets every quarter: the federal short-term rate plus three percentage points for individuals. For 2026 the underpayment rate was 7% from January to March, 6% from April to June, 7% from July to September and 7% from October to December, according to the IRS table of quarterly rates; the rate on individual overpayments matched it, 7%, 6%, 7%, 7%. In 2025 the rate stayed at 7% all year. Interest is compounded daily and runs from the original due date of the return, even under an extension, until the tax is paid. It also applies to penalties. A balance of $5,000 left unpaid for 180 days at 7% costs about $176 of interest, on top of the failure-to-pay penalty. Rates for 2027 will be set quarter by quarter.
Checked by Radif Partners · Editorial policy · How we calculate
Quarterly rates for 2025 and 2026
| Quarter | Underpayment 2025 | Underpayment 2026 | Individual overpayment 2026 |
|---|---|---|---|
| January to March | 7% | 7% | 7% |
| April to June | 7% | 6% | 6% |
| July to September | 7% | 7% | 7% |
| October to December | 7% | 7% | 7% |
How daily compounding works
Each day, interest is added to the balance at one 365th of the annual rate, and the next day's interest is computed on the new balance. Over a year at 7%, $10,000 grows by about $725, slightly more than simple interest of $700. When the quarter changes, the new rate applies to the balance from that day. The calculator uses one rate for the whole period, which is exact inside a quarter and close otherwise.
Interest and penalties are separate
A late payment usually brings both: interest at the quarterly rate, and the failure-to-pay penalty of 0.5% a month, plus the failure-to-file penalty if the return was late too. Interest runs on the penalties as well. The underpayment penalty for estimated tax is computed at the same quarterly rate but is a penalty, figured on Form 2210. An extension stops none of these from the April date: it only removes the failure-to-file penalty.
The formula behind the rate
The IRS table of formulas sets the standard underpayment rate at the federal short-term rate plus 3 percentage points, for individuals and corporations alike, and a higher rate, plus 5 points, for large corporate underpayments above $100,000. Individuals receive the same rate on overpayments. The federal short-term rate is determined each quarter from Treasury yields, which is why the IRS rate moved from 7% to 6% and back during 2026.
Paying over time
Taxpayers who cannot pay in full can apply for a payment plan online. Interest keeps running on the unpaid balance, but for individuals who filed on time, the failure-to-pay penalty drops to 0.25% a month while the plan is in force. Paying whatever you can by the deadline, then the rest through the plan, keeps both charges lower.
Sources: IRS: Quarterly interest rates on underpayments and overpayments; IRS: Failure to pay penalty, read on October 11, 2026.