The Internal Revenue Service (IRS) today announced this week that interest rates will decrease for the calendar quarter beginning January 1, 2025. The revised rates, which apply to overpayments and underpayments, are as follows:
- 7% for overpayments (payments exceeding the amount owed) for individuals and 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.
How Interest Rates Are Determined
Under the Internal Revenue Code, interest rates are reviewed and adjusted quarterly. For individual taxpayers, the rate for both overpayments and underpayments is calculated as the federal short-term rate plus 3 percentage points.
For corporations:
- The rate for underpayments is the federal short-term rate plus 3 percentage points.
- The rate for overpayments is the federal short-term rate plus 2 percentage points.
- The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.
- For corporate overpayments exceeding $10,000, the rate is the federal short-term rate plus 0.5 percentage points.
The interest rates announced today were computed based on the federal short-term rate determined in October 2024.
Additional Details
These updated rates and further specifics are outlined in Revenue Ruling 2024-25, which will be published in Internal Revenue Bulletin 2024-49, available on December 2, 2024.
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