The IRS has published the applicable federal rates (AFRs) and related tax rates for October 2026. The ruling sets the minimum interest benchmarks for certain loans and debt instruments, along with rates relevant to corporate ownership changes, low-income housing tax credits, and valuing certain interests in property.
The October rates include a 4.25% short-term AFR, 4.61% mid-term AFR, and 5.22% long-term AFR, assuming annual compounding. The rate under Section 7520 is 5.60%.
These rates apply to different transactions under specific provisions of the Internal Revenue Code. Taxpayers and advisers must select the rate that corresponds to the transaction, applicable period, and compounding convention. rr-26-19
IRS Action
Revenue Ruling 2026-19 establishes the prescribed federal tax rates for October 2026.
The ruling provides five categories of rates:
Applicable federal rates under Section 1274.
Adjusted applicable federal rates under Section 1288.
Corporate ownership change rates under Section 382.
Low-income housing tax credit percentages under Section 42.
Present-value valuation rates under Section 7520.
The ruling updates the monthly numerical rates. It does not change the underlying statutory requirements.
Why It Matters
Related-party loans: AFRs provide statutory interest benchmarks for transactions involving family members, shareholders, businesses, and other related parties. Loans with inadequate stated interest can trigger tax consequences under applicable provisions.
Corporate ownership changes: Section 382 limits the use of certain tax attributes following qualifying ownership changes. The October long-term tax-exempt rate of 3.95% is relevant to calculating the annual limitation.
Estate and gift tax planning: The Section 7520 rate of 5.60% affects the valuation of annuities, life interests, term interests, remainders, and reversions. The applicable rate can materially affect valuations.
Affordable housing investments: The IRS provides October percentages for calculating certain low-income housing tax credits. The statutory 9% minimum continues to apply to qualifying new buildings that are not federally subsidized.
This is a routine monthly rate publication, not a new enforcement initiative or change in tax policy. Its significance lies in applying updated rates to transactions governed by existing law.
Applicable Federal Rates for October 2026
Section 1274 establishes rules for determining the issue price of certain debt instruments issued in exchange for property.
The applicable federal rate serves as a statutory interest benchmark for specified debt transactions.
Revenue Ruling 2026-19 establishes the following AFRs for October 2026.
Short-term AFR
Applies to debt instruments with terms of three years or less.
Annual compounding: 4.25%
Semiannual compounding: 4.21%
Quarterly compounding: 4.19%
Monthly compounding: 4.17%
Mid-term AFR
Applies to debt instruments with terms exceeding three years but not exceeding nine years.
Annual compounding: 4.61%
Semiannual compounding: 4.56%
Quarterly compounding: 4.53%
Monthly compounding: 4.52%
Long-term AFR
Applies to debt instruments with terms exceeding nine years.
Annual compounding: 5.22%
Semiannual compounding: 5.15%
Quarterly compounding: 5.12%
Monthly compounding: 5.10%
The IRS also publishes rates equal to specified percentages of the AFR.
For October 2026, the annual-compounding rates include:
110% of the short-term AFR: 4.68%
120% of the short-term AFR: 5.11%
130% of the short-term AFR: 5.54%
110% of the mid-term AFR: 5.08%
120% of the mid-term AFR: 5.54%
130% of the mid-term AFR: 6.02%
150% of the mid-term AFR: 6.96%
175% of the mid-term AFR: 8.14%
110% of the long-term AFR: 5.75%
120% of the long-term AFR: 6.28%
130% of the long-term AFR: 6.81%
The ruling also provides the corresponding semiannual, quarterly, and monthly compounded rates.
Tax professionals should use the rate specifically required by the governing Code provision rather than treating the standard AFR as universally applicable. rr-26-19
Adjusted Applicable Federal Rates
Section 1288 establishes adjusted AFRs for specified federal tax purposes.
For October 2026, the IRS prescribes the following adjusted rates.
Short-term adjusted AFR
Annual: 3.23%
Semiannual: 3.20%
Quarterly: 3.19%
Monthly: 3.18%
Mid-term adjusted AFR
Annual: 3.49%
Semiannual: 3.46%
Quarterly: 3.45%
Monthly: 3.44%
Long-term adjusted AFR
Annual: 3.95%
Semiannual: 3.91%
Quarterly: 3.89%
Monthly: 3.88%
These adjusted rates differ from the standard AFRs and serve separate statutory purposes.
The distinction matters when a provision expressly requires an adjusted rate rather than the ordinary AFR. rr-26-19
Corporate Ownership Changes Under Section 382
Section 382 generally limits a corporation’s ability to use pre-change net operating losses and certain other tax attributes following an ownership change.
The annual limitation generally depends on the loss corporation's value immediately before the ownership change, multiplied by the applicable long-term tax-exempt rate, subject to statutory adjustments and special rules.
For October 2026, the IRS establishes:
Adjusted federal long-term rate: 3.95%
Long-term tax-exempt rate: 3.95%
The long-term tax-exempt rate equals the highest adjusted federal long-term rate for the current month and the preceding two months.
For qualifying ownership changes during October 2026, the prescribed rate is 3.95%.
For illustration, a corporation with a $10 million value immediately before an ownership change would have a preliminary annual Section 382 limitation of $395,000 using the October rate.
That calculation assumes the $10 million amount represents the applicable statutory value and excludes adjustments or special limitations.
The ruling does not change the ownership-change tests or the rules governing which tax attributes Section 382 limits. rr-26-19
Low-Income Housing Tax Credit Rates
Section 42 provides federal income tax credits for qualifying investments in low-income rental housing.
Revenue Ruling 2026-19 establishes the following October 2026 percentages:
70% present-value credit: 8.15%
30% present-value credit: 3.49%
The percentages determine applicable credit amounts for buildings subject to the relevant statutory provisions.
However, Section 42(b)(2) establishes a minimum 9% applicable percentage for qualifying non-federally subsidized new buildings placed in service after July 30, 2008.
Consequently, the published 8.15% percentage does not displace the statutory 9% minimum for buildings that qualify for that treatment.
The distinction is important because applying the published monthly percentage without considering the statutory minimum could understate the credit available for a qualifying project.
The ruling does not modify the eligibility requirements, qualified basis calculations, or other substantive rules governing the credit. rr-26-19
Section 7520 Valuation Rate
Section 7520 establishes a prescribed interest rate for valuing certain interests in property.
The provision applies to calculations involving:
Annuities.
Life interests.
Interests lasting for a specified number of years.
Remainder interests.
Reversionary interests.
For October 2026, the IRS sets the Section 7520 rate at 5.60%.
The rate plays an important role in estate and gift tax valuations, including certain charitable planning arrangements and transfers involving divided interests in property.
The Section 7520 rate differs from the ordinary AFR because it serves a distinct valuation purpose.
A higher or lower prescribed rate can change the actuarial value assigned to a transferred interest, depending on the structure of the transaction.
Tax professionals must apply the appropriate valuation rules, actuarial factors, and any available statutory rate-selection provisions.
Revenue Ruling 2026-19 supplies the October rate but does not revise those valuation rules. rr-26-19
Statutory Framework
Revenue Ruling 2026-19 implements existing statutory provisions that require the IRS to publish prescribed rates.
Section 1274(d) establishes AFRs used in determining the issue price of certain debt instruments issued for property.
Section 1288(b) governs the adjusted AFR calculations used for specified tax purposes.
Section 382(f) establishes the long-term tax-exempt rate relevant to limitations on corporate tax attributes following ownership changes.
Section 42(b) governs applicable percentages used to calculate low-income housing tax credits.
Section 7520 establishes valuation rules for certain annuities and interests in property.
The ruling also identifies Sections 280G, 467, 468, 482, 483, 7702, and 7872 among the related provisions. It does not separately explain their operation or announce substantive changes to those sections.
Practical Implications
Practitioners handling transactions whose tax treatment depends on prescribed federal interest rates should note the October 2026 rates.
For loan documentation, advisers should confirm the appropriate AFR for the transaction’s term, compounding convention, and governing statutory provision. The applicable rate may depend on when the transaction occurs and any relevant statutory timing rules.
For corporate acquisitions, advisers should incorporate the prescribed Section 382 rate when calculating limitations associated with qualifying October ownership changes. The rate alone does not determine the final limitation.
For estate and gift tax planning, practitioners should evaluate the October Section 7520 rate when valuing relevant interests and applying any permitted rate-selection rules.
For affordable housing transactions, advisers should distinguish the published monthly credit percentages from the statutory 9% minimum applicable to qualifying projects.
These considerations arise from existing law. Revenue Ruling 2026-19 supplies the October figures needed to apply that law.
Result
The IRS sets the prescribed federal tax rates for October 2026, including annual AFRs of 4.25%, 4.61%, and 5.22%; a Section 382 long-term tax-exempt rate of 3.95%; and a Section 7520 valuation rate of 5.60%.
The Takeaway
Revenue Ruling 2026-19 is a routine monthly update that directly affects transactions that rely on prescribed federal tax rates. Tax professionals should verify the applicable October rate, compounding convention, and statutory requirements before calculating interest, corporate loss limitations, housing credits, or property valuations.
List of Citations
Rev. Rul. 2026-19: Establishes prescribed federal tax rates for October 2026.
IRC § 1274(d): Governs applicable federal rates for certain debt instruments issued for property.
IRC § 1288(b): Governs adjusted applicable federal rates.
IRC § 382(f): Establishes the long-term tax-exempt rate used in calculating certain corporate tax attribute limitations.
IRC § 42(b)(1): Governs applicable percentages for low-income housing tax credits.
IRC § 42(b)(2): Establishes the 9% minimum applicable percentage for qualifying non-federally subsidized new buildings.
IRC § 7520: Governs the valuation of certain annuities, life interests, term interests, remainders, and reversions.
IRC § 7872: Addresses the tax treatment of certain below-market loans.
Source: Internal Revenue Service, Revenue Ruling 2026-19, Prescribed Rates for Federal Income Tax Purposes for October 2026.