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The Internal Revenue Service has released the Applicable Federal Rates (AFRs) for September 2019. AFRs are published monthly and represent the minimum interest rates that should be charged for family loans to avoid tax complications.
Here are the rates for September 2019:
|
| Annual | Semiannual | Quarterly | Monthly |
| Short-term | 1.85% | 1.84% | 1.84% | 1.83% |
| Mid-term | 1.78% | 1.77% | 1.77% | 1.76% |
| Long-term | 2.21% | 2.20% | 2.19% | 2.19% |
The Section 7520 interest rate for September 2019 remains at 2.2 percent. The Section 7520 interest rate is the interest rate used in a common estate tax planning technique called a “grantor retained annuity trust” or “GRAT.” In general, the lower the interest rate, the more effective the transaction is for reducing estate taxes.
With the new lower AFRs, consideration should be given to the possibility of making intra-family loans or refinancing of existing loans. For more information about possibly taking advantage of these lower AFRs, please contact someone in our Trusts & Estates group.
Find the full revenue ruling for September 2019 here.