Compliance
Understanding Current IRS Interest Rates and What They Mean for You
No rise in IRS interest rates for Q1 2026 means timing matters when managing underpayments, overpayments, or planning refunds.
By NomadicTax Research Team • 5-8 min read • November 17, 2025
## What Are IRS Interest Rates for Q1 2026?
The IRS announced on **November 13, 2025** that interest rates applicable to overpayments and underpayments will **remain the same** in the calendar quarter starting January 1, 2026. ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai))
Here’s how the rates break down:
| Type | Rate (individuals) | Corporation rate | Other specifics |
|---|---|---|---|
| Overpayments | **7%**, compounded daily | **6%** | A lower rate (4.5%) applies for corporate overpayments **exceeding $10,000**. ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai)) |
| Underpayments | **7%** | Corporate underpayments: **9%** for large corporate underpayments. ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai)) |
## Why This Stability Matters
**1. Refund timing and strategies:** For those expecting refunds, holding off on overpayments doesn’t yield higher returns. No rush to prepay hoping for better credit.
**2. Debt strategies:** If you carry tax liabilities, underpayment penalties or interest won’t get worse next quarter—but staying current avoids compounding.
**3. Harvesting losses or planning payments:** Knowing the rate will stay constant helps decision making around when to make estimated payments or pay down debt.
## Practical Tips
- Evaluate whether accelerated payments or overpayments make sense—if interest on overpayments isn’t rising, you might allocate funds elsewhere.
- For businesses, large underpayments have steeper rates—watch timing of payments and revenue recognition.
- Ensure you’re not caught by brutal penalty for underpayment—quarterly estimations matter.
- Plan around refunds—if expecting one, knowing rate doesn’t change can improve cash flow planning.
## Example Scenario
*Maria, an individual taxpayer, is owed a refund of $5,000 from her 2023 tax return. She contemplated making voluntary prepayments toward 2024 taxes to offset interest costs. Since the rate on overpayments remains at 7%, she figures she’ll gain the same value whether she pre-pays now or later in the quarter, so she shifts focus to emergency savings instead.*
## Bottom Line
Stable interest rates in Q1 2026 may feel less exciting than a hike—but they provide a clear financial signal. Use this period to lock in favorable moves, avoid overpaying unless strategic, and keep tight control on underpayments.