The Internal Revenue Service this week announced that interest rates will decrease by one percentage point for the calendar quarter beginning Jan. 1, 2025.
For individuals, the new rate for overpayments and underpayments will be 7% per year, compounded daily.
Here is a complete list of the new interest rates announced Monday:
- 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 interest rate is determined quarterly. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, for corporations, 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 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 this week are computed from the federal short-term rate determined during October 2024.
Interest rates have been at their current levels of 8% for overpayments and underpayments for individuals since the fourth quarter of 2023.
