IRS sets August 2026 applicable federal rates
Rev. Rul. 2026-13
Reader Takeaway
The IRS has set the annual applicable federal rates for August 2026 at 4.10% for short-term, 4.35% for mid-term, and 4.92% for long-term obligations.
Holding
Revenue Ruling 2026-13 sets the federal interest and tax rates for August 2026. These rates apply to sections 42, 382, 1274, 1288, and 7520.
Why It Matters
The AFRs establish minimum interest benchmarks for many related-party loans, installment sales, below-market financing arrangements, and other debt instruments.
The §7520 rate increases to 5.20% for August 2026 and applies when valuing annuities, life estates, term interests, remainders, and reversions.
The §382 long-term tax-exempt rate is 3.77% for ownership changes occurring during August. That rate can affect the annual limitation on the use of pre-change tax attributes following an ownership change.
The ruling also supplies monthly rates used for low-income housing tax credit calculations. These are routine monthly updates rather than a change in tax policy.
Key Rates
For annual compounding, the AFRs for August 2026 are:
Short-term AFR: 4.10%
Mid-term AFR: 4.35%
Long-term AFR: 4.92%
The ruling also lists AFR multiples for provisions that require 110%, 120%, 130%, 150%, or 175% of the standard AFR.
For example:
120% short-term AFR: 4.93%
120% mid-term AFR: 5.23%
120% long-term AFR: 5.91%
The ruling also includes monthly, quarterly, and semiannual compounding equivalents.
Adjusted AFRs
The annual adjusted AFRs for August 2026 are:
Short-term adjusted AFR: 3.10%
Mid-term adjusted AFR: 3.29%
Long-term adjusted AFR: 3.72%
Adjusted AFRs are used for certain tax-eAdjusted AFRs apply to certain tax-exempt obligations and other calculations under §1288.
Adjusted federal long-term rate: 3.72%
Long-term tax-exempt rate: 3.77%
The long-term tax-exempt rate is the highest adjusted federal long-term rate from the current month and the previous two months. This rate matters when applying §382 after an ownership change.
Low-Income Housing Credit Rates
The §42(b)(1) appropriate percentages for August 2026 are:
70% present value credit: 8.08%
30% present value credit: 3.46%
The ruling notes that for qualifying non-federally subsidized new buildings placed in service after July 30, 2008, the applicable percentage cannot be less than 9% under §42(b)(2).
Section 7520 Rate
The §7520 rate for August 2026 is 5.20%.
Practitioners use this rate to determine the present value of:
Annuities
Life interests
Interests for a term of years
Remainder interests
Reversionary interests
This is a routine monthly rate ruling, but the numbers matter whenever a transaction closes or a valuation date falls on or after August 2026. Practitioners handling related-party financing, §382 limitations, estate-planning valuations, or housing credit calculations should use the August rates rather than carry forward rates from prior months.