Applicable Federal Rates – AFR

Applicable federal rates, or AFRs, refer to the interest rate on loans based on the current federal rates. A loan may have an AFR applied to the loan, or Applicable Federal Rates credited to the loan. When applying for a loan, the Applicable Federal Rates can be a very important factor in determining the terms of the loan.

The Applicable Federal Rate is the minimum rate of interest that the IRS requires on private loans. It is published by the IRS every month. It varies by the length of the loan. It is also affected by market conditions.

These Rates are used for various tax purposes. It is a requirement of the Internal Revenue Code. It is based on the market yields of the marketable debts in the United States.

The AFR can also be used to calculate the original issue discount of an instrument. It is calculated using a variety of factors, including the term of the instrument, the market yield of the US marketable debts, and the interest rates of the three government securities dealers.

What is the Applicable Federal Rate (AFR) for January 2023?

Applicable Federal Rates are determined by the market yields on US marketable debts, and the IRS publishes three categories of AFR rates monthly. These rates are short-term, mid-term, and long-term. Each AFR rate has different interest rates based on the period and compounding period.

Applicable Federal Rates can be used for the computation of the tax exemption for the interest of tax-exempt obligations. This is done by a method that is provided by the Treasury Department regulations. The AFR is set each month based on the market yield of the US marketable debts. There are short-term, mid-term, and long-term AFR rates. The following tables show the Applicable Federal Rates for January 2023.

Short-Term Applicable Federal Rates

MonthYearAnnualSemiannualQuarterlyMonthly
January20234.50%4.45%4.43%4.41%

Mid-Term Applicable Federal Rates

MonthYearAnnualSemiannualQuarterlyMonthly
January20233.85%3.81%3.79%3.78%

Long-Term Applicable Federal Rate

MonthYearAnnualSemiannualQuarterlyMonthly
January20233.84%3.80%3.78%3.77%

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