Applicable Federal Rate (AFR): current IRS rates
If you're lending money to someone in your family, the AFR is the number that decides whether the IRS treats it as a loan or as something else. It changes every month. Here's this month's, and what it means for you.
Work out your numbers and interest rate
Chipkie’s free family loan calculator uses the rates on this page. Enter the amount and the term and it’ll show you the applicable AFR, the repayments, and what charging below it could cost you.
Family Loan Calculator
If you go ahead, Chipkie produces a signed agreement and tracks the repayments — the record that makes a loan a loan.
AFR for August 2026
| Term of the loan | Annual rate |
|---|---|
| Short-term — up to 3 years | 4.1% |
| Mid-term — over 3 years and up to 9 years | 4.35% |
| Long-term — over 9 years | 4.92% |
Last checked 7 August 2026.
Is the AFR an interest rate I have to pay?
No. It’s a minimum for tax purposes, not a payment. You can charge more than the AFR if you want to — you simply take on the tax treatment described above if you charge materially less.
Which rate applies to a loan with no fixed end date?
A demand loan — repayable whenever the lender asks — is treated differently from a term loan, and the applicable rate can move with each period rather than being fixed at the outset. If your arrangement has no end date, raise it with an accountant before relying on any figure here.
Does a family loan have to be in writing?
There’s no universal written-form requirement for tax purposes, but the burden of showing it was a loan sits with you. A written agreement, a repayment schedule and a record of payments received are the evidence. Chipkie exists to keep exactly that record.
What if the borrower never repays?
An unpaid family loan that’s forgiven is generally treated as a gift at that point, which brings gift-tax reporting into play for larger amounts. Again, the documentation is what determines whether you’re forgiving a debt or were always making a gift.
How often is this page updated?
Every month, automatically, from the same figures Chipkie uses inside the app. The date under the table shows when they were last checked.
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