IRS provides July 2026 federal tax rates for AFRs, §7520, §382, §42, and §7872
Rev. Rul. 2026-12
Rev. Rul. 2026-12 provides the July 2026 federal tax rates that practitioners need for below-market loans, deferred payments, valuation calculations, loss limitation planning, and low-income housing credit calculations.
IRS Action
The IRS released Rev. Rul. 2026-12 to announce the federal tax rates for July 2026. These include the applicable federal rates, adjusted federal rates, the §382 long-term tax-exempt rate, §42 credit percentages, the §7520 valuation rate, and the 2026 blended annual rate under §7872.
Why It Matters
This is routine monthly guidance, but it has immediate transactional use. AFRs affect loans, installment sales, deferred compensation, private annuities, and other arrangements that depend on imputed interest rules.
The July 2026 short-term AFR is 4.00%, the mid-term AFR is 4.35%, and the long-term AFR is 4.98%, each stated on an annual compounding basis.
The §7520 rate is 5.20% for July 2026. Practitioners use this rate to value annuities, life interests, term interests, remainders, and reversions.
The §7872 blended annual rate for 2026 is 3.82%. That rate matters for demand loans with below-market interest, because §7872 can treat forgone interest as transferred between the parties.
Key Facts
Rev. Rul. 2026-12 applies to July 2026.
The ruling provides:
AFRs under §1274(d).
Adjusted AFRs under §1288(b).
The adjusted federal long-term rate and the long-term tax-exempt rate under §382(f).
The appropriate percentages for the low-income housing credit under §42(b)(1).
The §7520 rate for present-value calculations.
The 2026 blended annual rate under §7872(e)(2).
Statutory Framework
§1274 uses AFRs to determine interest and issue price for certain debt instruments issued for property. §1288 uses adjusted AFRs for tax-exempt obligations. §382 uses a long-term tax-exempt rate to limit use of net operating losses after an ownership change. §42 uses monthly credit percentages for low-income housing credit calculations. §7520 supplies a rate for valuing split interests. §7872 applies to below-market loans and uses a blended annual rate for certain demand loans.
July 2026 Rates
The annual AFRs for July 2026 are:
Short-term AFR: 4.00%.
Mid-term AFR: 4.35%.
Long-term AFR: 4.98%.
The annual adjusted AFRs for July 2026 are:
Short-term adjusted AFR: 3.03%.
Mid-term adjusted AFR: 3.29%.
Long-term adjusted AFR: 3.77%.
The §382 rates for July 2026 are:
Adjusted federal long-term rate: 3.77%.
Long-term tax-exempt rate for ownership changes during July 2026: 3.77%.
The §42 low-income housing credit percentages for July 2026 are:
70% present value credit: 8.09%.
30% present value credit: 3.47%.
The ruling also notes that §42(b)(2) preserves a minimum 9% applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008.
The §7520 rate for July 2026 is 5.20%. The §7872(e)(2) blended annual rate for 2026 is 3.82%.
Practical Effect
Practitioners should use the July 2026 rates for any transactions and valuations that need the applicable monthly federal rate. The ruling does not change the rules, but simply provides the numbers required for compliance. In a way, it is like a monthly weather report for tax law.