Finance category
Mortgage, loan, investing, tax, and money calculators.
AFR Loan Calculator
The IRS publishes AFR rates monthly — short-term, mid-term, long-term. Setting a family loan below AFR triggers imputed interest and gift-tax reporting. This calculator picks the right tier and quantifies the imputed-interest risk if underpriced.
Compliant with AFR
No
Required AFR tier
Long-term
Required AFR rate
4.90%
Rate shortfall
1.90%
Annual imputed interest
$3,800
Lifetime imputed interest
$57,000
Lender's annual phantom tax
$912
How the math works
$200K 15-year loan at 3% vs 4.9% long-term AFR: 1.9% shortfall × $200K = $3,800/yr imputed interest. Lender owes phantom income tax + gift reporting; over 15 years, $57K imputed.
Fix: charge at or above current AFR tier, add 0.25% cushion for safety, document everything in writing with a promissory note.
How to Use
- Enter loan amount and term years to pick the right AFR tier (short/mid/long).
- Enter the current AFR (look up IRS Revenue Ruling) and the rate you're actually charging.
- See compliance status and annual/lifetime imputed interest if underpriced.
Frequently Asked Questions
Where do I find current AFR?
IRS publishes monthly (search 'IRS Applicable Federal Rates'). Use the Revenue Ruling's annual rate with annual compounding for typical fixed-rate family loans.
What if I charge below AFR?
IRS imputes interest at AFR. Lender has phantom interest income (taxable); the shortfall is a gift each year. Below $10K loans not used for income property are exempt; $10K-$100K have net-investment-income limit.
Can I use short-term AFR for a 10-year loan?
No. Term determines tier: ≤3 years short, 3-9 years mid, >9 years long. Undertier = imputed interest.
Does AFR lock at loan origination?
Yes — the applicable AFR is the one in effect at origination. Subsequent AFR moves don't re-rate the loan. Document the rate and date clearly in the note.
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