AFR rates: applicable federal rates for November 2026

“Each month, the IRS provides various prescribed rates for federal income tax purposes.” IRS, Index of applicable federal rates (AFR) rulings

What are the applicable federal rates for November 2026?

The applicable federal rates for November 2026 come from Rev. Rul. 2026-21, Table 1. The short-term AFR is 4.67%, the mid-term AFR is 5.08% and the long-term AFR is 5.52%, all at annual compounding. IRC section 1274(d) assigns the short-term rate to debt with a term of 3 years or less, the mid-term rate to terms over 3 years and up to 9 years, and the long-term rate to terms over 9 years. Each rate is printed at four compounding periods, and the column used should match how often the note compounds interest.

The same ruling sets the section 7520 rate at 6.20% (Table 5) and the section 382 long-term tax-exempt rate at 4.18% (Table 3). For comparison, Rev. Rul. 2026-19 set the October 2026 short-term AFR at 4.25% and the section 7520 rate at 5.60%, so the month a note is signed changes the test rate.

Which AFR applies to which loan or sale?

The AFR that applies depends on the document behind the transaction: a demand note, a term note, an installment sale contract or a valuation of a split interest. IRC section 7872(f)(2) uses the short-term rate for demand loans and, for term loans, the rate for the loan's term as of the day it was made, both compounded semiannually. For a sale or exchange, IRC section 1274(d)(2) uses the lowest AFR in effect during the 3-month period ending with the first month with a binding written contract. A sale-leaseback uses 110% of the AFR under section 1274(e).

When a charitable deduction is allowed for part of the property, IRC section 7520(a) lets the taxpayer use the rate for either of the 2 months before the valuation month, so a November 2026 transfer can use 5.60% (October) or 5.40% (September). Gains on the sale itself still flow to Form 4797 or Form 8949 as usual.

How does IRC section 7872 treat a below-market loan?

IRC section 7872 treats a below-market gift loan or demand loan as if the lender charged interest at the AFR and then gave that interest back to the borrower. Under section 7872(a)(1), the forgone interest is treated as transferred from the lender to the borrower and retransferred to the lender as interest. Section 7872(a)(2) places both transfers on the last day of the calendar year. For an intra-family loan, the lender reports the imputed interest as income and the same amount is a gift to the borrower. Section 7872(c)(1) also covers compensation-related loans, corporation-shareholder loans and loans with a tax avoidance purpose. Two statutory limits for gift loans between individuals matter most in practice:

• $10,000 de minimis. Section 7872(c)(2) does not apply on any day the aggregate outstanding loans between the two individuals are $10,000 or less, unless the loan is used to buy income-producing assets.
• $100,000 net investment income cap. Section 7872(d)(1) limits the interest treated as retransferred to the borrower's net investment income when aggregate loans are $100,000 or less, and treats net investment income of $1,000 or less as zero.

Neither limit applies when one of the principal purposes of the interest arrangement is tax avoidance.

What does an imputed interest calculation look like?

For example, a parent lends an adult child $600,000 on November 1, 2026 under an interest-free demand note, and the balance stays outstanding through November 30. The aggregate loans are above $100,000, so the net investment income cap in IRC section 7872(d)(1) does not apply. Section 7872(f)(2)(B) uses the November short-term AFR at semiannual compounding, 4.62% from Rev. Rul. 2026-21. The calculation treats November as 30 of the 182.5 days in a semiannual period.

The $2,256.67 is a gift from parent to child and interest income to the parent, both treated as made on December 31, 2026. If the same $600,000 loan were outstanding for all of 2026, the blended annual rate of 3.82% in Rev. Rul. 2026-12 gives $22,920 of forgone interest for the year.

What do reviewers check on AFR loans?

A reviewer checking a below-market loan or seller-financed note against the AFR confirms six items, each tied to the Internal Revenue Code or the monthly revenue ruling. The note itself is the first document to pull, because the signing date, the term and the compounding language decide which of the 56 rates in Table 1 applies. Rev. Rul. 2026-21 only covers instruments dated in November 2026, so a note signed in an earlier month needs that month's ruling from the IRS index.

For a demand loan, the lender's record of the outstanding balance by month is the next document to request, because forgone interest is figured period by period at that period's short-term rate. Without it, the reviewer cannot tell whether the blended annual rate or a series of monthly rates should apply to the year.