Updated October 1, 2026. Quick answer: The August 2026 applicable federal rate is 4.10% short-term, 4.35% mid-term and 4.92% long-term, annual compounding, from Rev. Rul. 2026-13. August is still inside the three-month look-back for a sale or exchange under a binding contract made in October 2026.
Where the rates stand for later months: the December 2026 AFR rates when the IRS publishes them.
The full August 2026 table
Table 1 of Rev. Rul. 2026-13, every tier and every compounding column, as printed.
| Tier | Rate | Annual | Semiannual | Quarterly | Monthly |
|---|---|---|---|---|---|
| Short-term | AFR | 4.10% | 4.06% | 4.04% | 4.03% |
| Short-term | 110% AFR | 4.52% | 4.47% | 4.45% | 4.43% |
| Short-term | 120% AFR | 4.93% | 4.87% | 4.84% | 4.82% |
| Short-term | 130% AFR | 5.35% | 5.28% | 5.25% | 5.22% |
| Mid-term | AFR | 4.35% | 4.30% | 4.28% | 4.26% |
| Mid-term | 110% AFR | 4.79% | 4.73% | 4.70% | 4.68% |
| Mid-term | 120% AFR | 5.23% | 5.16% | 5.13% | 5.11% |
| Mid-term | 130% AFR | 5.67% | 5.59% | 5.55% | 5.53% |
| Mid-term | 150% AFR | 6.55% | 6.45% | 6.40% | 6.36% |
| Mid-term | 175% AFR | 7.67% | 7.53% | 7.46% | 7.41% |
| Long-term | AFR | 4.92% | 4.86% | 4.83% | 4.81% |
| Long-term | 110% AFR | 5.42% | 5.35% | 5.31% | 5.29% |
| Long-term | 120% AFR | 5.91% | 5.83% | 5.79% | 5.76% |
| Long-term | 130% AFR | 6.42% | 6.32% | 6.27% | 6.24% |
Where August sits in the three-month look-back
For a sale or exchange, section 1274(d)(2) uses “the lowest of the applicable Federal rates in effect for any month in the 3-calendar-month period ending with the 1st calendar month in which there is a binding contract in writing for such sale or exchange”. For a binding contract in October 2026 the window is August, September and October. Annual rates for the three months:
| Tier | August | September | October | Lowest of the three |
|---|---|---|---|---|
| Short-term | 4.10% | 4.18% | 4.25% | 4.10% (August) |
| Mid-term | 4.35% | 4.49% | 4.61% | 4.35% (August) |
| Long-term | 4.92% | 5.12% | 5.22% | 4.92% (August) |
August is the lowest in each tier, so it sets the rate for a sale or exchange with a binding written contract in October 2026 (read from the three rulings). After October 31 the window moves on to September, October and November.
The section 7520 rate for August 2026
The same ruling’s Table 5 carries the section 7520 rate. For August 2026 the IRS table lists a 120% mid-term figure of 5.23 and a section 7520 rate of 5.2%. It is not one of the three AFR tiers; the full 2026 series is on the 7520 rate page.
Which tier a loan uses
The applicable federal rate comes from section 1274(d) and depends on the term of the debt instrument. Section 1274(d)(1)(A) sets the tier: “Not over 3 years” takes the short-term rate, “Over 3 years but not over 9 years” the mid-term rate and “Over 9 years” the long-term rate. The loan mechanics are on the family loan minimum interest rate page.
Common mistakes
- Using a month’s rate for a loan signed in a different month without checking the look-back rule that applies to it.
- Reading the section 7520 rate as an AFR tier. It is a separate figure in the same ruling.
- Taking the annual column when a document calls for semiannual compounding.
Related: the 2026 AFR table, September 2026 AFR rates, October 2026 AFR rates, and AFR rates by month.
The term you choose is the term the document has to state
Which of the three rates applies depends on the maturity, and a demand loan is re-tested every year while a fixed term is settled on the day you sign. That choice only exists on paper: the document is what fixes the term, the rate and the repayment schedule that the section 1274(d) tiers are read against. LawDepot builds a state-specific loan agreement.
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Sources
- Rev. Rul. 2026-13, Table 1 and Table 5 (August 2026): https://www.irs.gov/pub/irs-drop/rr-26-13.pdf
- Rev. Rul. 2026-17, Table 1 and Table 5 (September 2026): https://www.irs.gov/pub/irs-drop/rr-26-17.pdf
- Rev. Rul. 2026-19, Table 1 and Table 5 (October 2026): https://www.irs.gov/pub/irs-drop/rr-26-19.pdf
- IRS, Section 7520 interest rates: https://www.irs.gov/businesses/small-businesses-self-employed/section-7520-interest-rates
- 26 U.S.C. 1274, determination of issue price in the case of certain debt instruments (GovInfo): https://www.govinfo.gov/link/uscode/26/1274
Sources: the primary documents linked above, read on October 1, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.