IRS Blended Annual Rate for 2026: 3.82% — What It Is & When to Use It
The Section 7872 blended annual rate for 2026 is 3.82% (Rev. Rul. 2026-12); for 2025 it was 4.22%. Here is what the IRS blended rate means for family and employee demand loans, with a year-by-year table.
If you lent money to a family member — or your company made a low-interest loan to an employee — the IRS has a specific interest rate it expects that loan to carry. For demand loans (loans repayable at any time, with no fixed term), that number is the Section 7872 blended annual rate, published by the IRS in a revenue ruling around the middle of each year.
For 2026, the blended annual rate is 3.82% (Rev. Rul. 2026-12). For 2025 — the year most returns being filed now cover — it was 4.22% (Rev. Rul. 2025-13).
Here is what the rate means, who needs it, and every year's value back to 2019.
What is the IRS blended annual rate?
Under Section 7872 of the Internal Revenue Code, a "below-market loan" — one charging less interest than the applicable federal rate (AFR) — generates forgone interest that the IRS treats as if it actually changed hands. The lender is deemed to have received interest income; the borrower is deemed to have received a gift or compensation.
For demand loans outstanding a full calendar year, calculating this month-by-month against the short-term AFR would be tedious. The IRS simplifies it: the blended annual rate blends the January and July semiannual short-term AFRs into a single rate you apply once to the average loan balance for the year.
Forgone interest = Loan balance × (Blended annual rate − Rate actually charged)
The name fits the math: it is a weighted blend of the year's two semiannual rates — the same weighted-average principle behind every other blended rate. It is not a simple average of the two. Rev. Rul. 86-17 compounds them: blended rate = (1 + January rate ÷ 2) × (1 + July rate ÷ 2) − 1.
Blended annual rate by year
| Year | Blended annual rate | Source |
|---|---|---|
| 2026 | 3.82% | Rev. Rul. 2026-12 |
| 2025 | 4.22% | Rev. Rul. 2025-13 |
| 2024 | 5.03% | Rev. Rul. 2024-13 |
| 2023 | 4.65% | Rev. Rul. 2023-12 |
| 2022 | 1.40% | Rev. Rul. 2022-12 |
| 2021 | 0.13% | Rev. Rul. 2021-12 |
| 2020 | 0.89% | Rev. Rul. 2020-14 |
| 2019 | 2.42% | Rev. Rul. 2019-16 |
The IRS publishes each year's rate in a revenue ruling around the middle of the year, available at irs.gov/applicable-federal-rates. For the full series back to 1985 — and to compute forgone interest on your own loan balance — use the IRS blended annual rate calculator.
Blended annual rate for 2026
The blended annual rate for 2026 is 3.82%, published in Rev. Rul. 2026-12, Table 6. It is the third consecutive annual decline, down from 4.22% in 2025 and 5.03% in 2024, tracking the easing in short-term federal rates. If a demand loan between related parties stays outstanding through the whole of 2026, 3.82% is the rate you apply to the average balance when you prepare the 2026 return.
Blended annual rate for 2025
The blended annual rate for 2025 was 4.22% (Rev. Rul. 2025-13). This is the figure you need for a 2025 return: a demand loan or variable-balance loan between related parties outstanding during the 2025 calendar year is measured against 4.22%, not against the current year's rate. Filing for an earlier year works the same way — always use the blended annual rate for the year the loan was outstanding.
Blended annual rate for 2024
The blended annual rate for 2024 was 5.03% (Rev. Rul. 2024-13). It was the highest blended annual rate in over a decade, reflecting the elevated short- and mid-term federal rates through 2024, before the rate eased to 4.22% for 2025 and 3.82% for 2026.
A worked example
Suppose you lent your daughter $150,000 as an interest-free demand loan, outstanding for all of 2026:
- Forgone interest = $150,000 × 3.82% = $5,730
- The IRS treats you as having received $5,730 of interest income (taxable to you) and simultaneously gifted $5,730 back to her.
- That deemed gift counts against your $19,000 annual gift-tax exclusion for 2026 (unchanged from 2025).
If you had charged her 3.82% or more, Section 7872 would not apply at all — which is exactly why family lenders check this rate each year.
Who needs this rate?
- Family lenders making interest-free or low-interest demand loans to children or relatives.
- Employers making below-market loans to employees (the forgone interest is treated as compensation).
- Shareholders and corporations with informal loans back and forth.
- Accountants and estate planners documenting intra-family lending at defensible rates.
Exceptions worth knowing
- $10,000 de minimis exception — loans totaling $10,000 or less between individuals are generally exempt (unless used to buy income-producing assets).
- $100,000 exception — for loans up to $100,000, imputed interest is capped at the borrower's net investment income; if that income is $1,000 or less, it is treated as zero.
- Term loans are different — a loan with a fixed term uses the AFR for its month and duration at origination, not the blended annual rate.
The bottom line
If a demand loan between related parties is outstanding during 2026, apply 3.82% to the average balance to compute forgone interest — or charge at least that rate to keep the loan out of Section 7872 entirely. For a 2025 loan year, use 4.22%. This article is a plain-English reference, not tax advice: loan documentation and gift-tax reporting are exactly the situations where an hour with a CPA pays for itself.
Frequently Asked Questions
What is the IRS blended annual rate for 2026?
The IRS blended annual rate for 2026 is 3.82%, published in Rev. Rul. 2026-12, Table 6. It applies to demand loans between related parties that stay outstanding for the full calendar year. It is the third consecutive annual decline, down from 4.22% in 2025 and 5.03% in 2024.
What is the IRS blended annual rate for 2025?
The IRS blended annual rate for 2025 is 4.22%, published in Rev. Rul. 2025-13. Use it for a demand loan outstanding during the 2025 calendar year, including on a return filed later — you always apply the blended annual rate for the year the loan was outstanding, not the current year's rate. It fell from 5.03% in 2024, the highest blended annual rate in over a decade.
How is the IRS blended annual rate used?
Apply it to the average outstanding balance of a full-year demand loan to compute forgone interest: Forgone interest = Loan balance × (blended annual rate − rate actually charged). For a $150,000 interest-free demand loan outstanding all of 2026, forgone interest is $150,000 × 3.82% = $5,730, treated as interest income to the lender and a gift back to the borrower.
How does the IRS calculate the blended annual rate?
It compounds the two semiannual short-term AFRs rather than averaging them. Under Rev. Rul. 86-17 the formula is: blended rate = (1 + January semiannual short-term AFR ÷ 2) × (1 + July semiannual short-term AFR ÷ 2) − 1. Because the two half-year factors multiply, the result is slightly higher than the simple average of the January and July rates.
When does the IRS publish the blended annual rate?
The IRS publishes each year's blended annual rate in a revenue ruling around the middle of the year, in Table 6 of that ruling, available at irs.gov/applicable-federal-rates. The rate for 2026 appeared in Rev. Rul. 2026-12 and the rate for 2025 in Rev. Rul. 2025-13. Because it depends on the July semiannual short-term AFR, the figure for a given year cannot be published before roughly the middle of that year.
Is the blended annual rate the same as a blended tax rate?
No. The blended annual rate (3.82% for 2026) prices below-market loans under Section 7872. Your blended tax rate is your personal effective tax rate across all brackets. They are unrelated calculations — use a blended tax rate calculator for your effective rate, not this Section 7872 figure.
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