WASHINGTON, D.C. — The Internal Revenue Service (IRS) announced that federal interest rates on tax overpayments and underpayments will remain unchanged for the fourth quarter of 2025, which begins October 1.
For individual taxpayers, the annual interest rate for both overpayments and underpayments will remain at 7%, compounded daily. The IRS also released a detailed breakdown of applicable rates for corporations and other taxpayers.
Interest Rates Effective October 1, 2025
- 7% for overpayments by individuals and most taxpayers.
- 6% for corporate overpayments.
- 4.5% for the portion of a corporate overpayment exceeding $10,000.
- 7% for underpayments by individuals and most taxpayers.
- 9% for large corporate underpayments.
How IRS Interest Rates Are Determined
Under the Internal Revenue Code, IRS interest rates are updated quarterly and are based on the federal short-term rate established by the U.S. Treasury.
- For noncorporate taxpayers, both the overpayment and underpayment rates are set at the federal short-term rate plus 3 percentage points.
- For corporations, the standard underpayment rate is calculated as the federal short-term rate plus 3 percentage points, while the overpayment rate is the short-term rate plus 2 percentage points.
- A higher rate of federal short-term rate plus 5 percentage points applies to large corporate underpayments.
- The rate on the portion of a corporate overpayment exceeding $10,000 is set at the federal short-term rate plus 0.5 percentage points.
The IRS said the rates were computed using the federal short-term rate determined in July 2025. The details will be published in Revenue Ruling 2025-18, which will appear in the Internal Revenue Bulletin 2025-37 on September 8, 2025.
By holding rates steady, the IRS maintains continuity for taxpayers heading into the final quarter of the year, giving individuals and businesses predictable benchmarks for calculating interest on overpayments and outstanding tax liabilities.
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