IRS provides February 2026 federal rates for loans, housing credits, valuation, and ownership-change limits
Rev. Rul. 2026-3
Internal Revenue Service released Rev. Rul. 2026-3, setting the federal interest rates and percentages used across multiple Code provisions for February 2026.
The ruling publishes the monthly Applicable Federal Rates, adjusted AFRs, §382 limitation rates, low-income housing credit percentages, and the §7520 valuation rate.
These rates apply automatically. No elections. No discretion. If you use these provisions, these numbers control.
Scope of Rates Covered
The ruling provides February 2026 rates for the following sections:
§1274. Issue price of debt issued for property using AFRs.
§1288. Adjusted AFRs for certain long-term contracts.
§382. Limitation rates following an ownership change.
§42. Applicable percentages for low-income housing tax credits.
§7520. Valuation of annuities, life interests, remainders, and reversions.
Key Rates at a Glance
Applicable Federal Rates (AFR). Annual compounding.
Short-term AFR: 3.56%
Mid-term AFR: 3.86%
Long-term AFR: 4.70%
Higher AFR multiples are also provided. These include 110%, 120%, and 130%, and, for mid-term debt, up to 175%. These matters include provisions like §7872, which impute interest and compute penalties tied to AFR multiples.
Adjusted AFRs. Annual compounding.
Short-term adjusted AFR: 2.70%
Mid-term adjusted AFR: 2.92%
Long-term adjusted AFR: 3.56%
§382 ownership-change rates.
Adjusted federal long-term rate: 3.56%
Long-term tax-exempt rate: 3.56%
The tax-exempt rate equals the highest adjusted long-term rate for the current or prior two months. February holds that line.
Low-Income Housing Credit percentages under §42.
70% present-value credit: 7.99%
30% present-value credit: 3.43%
The statutory floor remains in place. For non-federally subsidized new buildings placed in service after July 30, 2008, the applicable percentage cannot fall below 9%, regardless of the published rate.
§7520 valuation rate.
4.6%
This rate governs present-value calculations for annuities, term interests, and remainder interests.
Practical Effects
Debt instruments issued for property must use these AFRs to determine the issue price and original issue discount.
Related-party and below-market loans rely on these AFRs and their percentage multiples to compute imputed interest.
Corporations with ownership changes must apply the February §382 rate to calculate annual loss-usage limits.
Affordable housing projects use the §42 percentages to size credits for February placed-in-service dates.
Estate planners and valuation professionals must use the 4.6% §7520 rate for February transfers and valuations.
Effective Date
All rates apply only for February 2026. March rates will be included in the next revenue ruling.
Takeaway
If you price debt, value interests, claim housing credits, or compute §382 limits in February 2026, Rev. Rul. 2026-3 supplies the numbers, and there is no wiggle room.
It’s easy to overlook the monthly AFR drop as 'routine,' but for anyone managing Section 72(t) distributions, these February rates are the pulse of their retirement strategy. Using a rate that’s even a few basis points off can trigger that 10% early distribution penalty back to day one. This update is a good reminder that 'set it and forget it' is a dangerous mantra when the IRS is tightening enforcement budgets and looking for low-hanging clerical fruit.
The February rates underscore a stabilizing yield curve, but the 4.6% Section 7520 rate remains the critical pivot point for actuarial valuations this quarter. It’s a reminder that while the 'One, Big, Beautiful Bill' (OBBBA) has adjusted the brackets, these monthly revenue rulings are where the real erosion of net-of-tax returns happens for high-velocity capital. Precision in timing these notes isn't just about 'saving a few points' anymore—it’s about preserving the internal rate of return against a structurally shifting discount rate.