Tax Planning
Understanding IRS Interest Rates Through the Turn of the Year
Interest rates for overpayments, underpayments, and large corporate underpayments will stay the same heading into 2026. Knowing these can affect your decision-making for tax payments, refunds, and timing transactions.
By NomadicTax Research Team • 5-8 min read • November 19, 2025
## What Interest Rates Are Set for Q1 of 2026?
On **Nov. 13, 2025**, the IRS announced that for the quarter beginning **January 1, 2026**, the following interest rates will continue unchanged:
| Type | Rate |
|------|------|
| Individuals—Overpayments & Underpayments | **7% compounded daily** |
| Corporations—Overpayments | 6% |
| Portion of corporate overpayment over $10,000 | 4.5% |
| Large corporate underpayments | 9% |
These rates are based on both the **federal short-term rate** (as determined in October 2025) plus statutory add-ons depending on taxpayer type ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai)).
## Why These Rates Matter: Key Implications
- **Underpayment penalties:** If you owe taxes, any delay costs 7%, large corporate underpayments even more.
- **Refund interest:** Wanting a refund? If you overpay or file early, the 7% rate applies—though under certain thresholds, corporate overpayment rates differ.
- **Installment/estimated payments:** Individuals and businesses should factor this into cash flow planning, especially those owing large sums.
## Example Scenarios
- *Small business with late payment:* Sammy Co. underpays corporate tax and owes $50,000 for Q1‐2026. He'll face interest at **7% annual rate**, emphasizing the value of making accurate estimated payments.
- *High earner awaiting refund:* Dana overpays her 2025 liability by $8,000; she'll get 7% interest on the overpayment once IRS approves refund. Delays cost her.
- *Corporation with large overpayment:* CorpCo overpaid by $15,000; amount above $10,000 gets lower overpayment rate of 4.5% annually. Understanding thresholds helps maximize return ([irs.gov](https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-first-quarter-of-2026?utm_source=openai)).
## What You Should Do Now
- If expecting a **large refund**, evaluate whether to delay or accelerate payments near year‐end—timing affects interest earned.
- If you're anticipating **owed taxes**, pay as accurately and timely as possible—to avoid underpayment interest burden.
- Review your **corporate tax structure** and whether you are in the “large corporation” category for underpayment rates (9%).
- Maintain attention to Federal short-term rate changes, as future rates often fluctuate based on this baseline.
Keeping an eye on interest rates helps both individuals and businesses manage cash flow, tax returns, and payments with more precision—thereby avoiding surprises once filing season arrives.