IRS to Drop Interest Rates in January

By Melanie Waddell

News November 19, 2024 at 12:23 PM

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The Internal Revenue Service said Monday that interest rates will decrease for the calendar quarter beginning Jan. 1.

For individuals, the rate for overpayments and underpayments will be 7% per year, compounded daily, the agency said— a 1% drop from last year.

Other new rates are:

7% for overpayments (payments made in excess of the amount owed), 6% for corporations.
4.5% for the portion of a corporate overpayment exceeding $10,000.
7% for underpayments (taxes owed but not fully paid).
9% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.

"For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points," the agency said.

"Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points," the IRS said. "The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point."

The interest rates announced Monday are computed from the federal short-term rate determined during October 2024.

Credit: Bloomberg

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