Interest Rates to Decrease for First Quarter of 2025
In November 2024, the IRS announced that interest rates will decrease for the first quarter of 2025, which begins January 1, 2025. The changes outlined in IR-2024-290 outline all the relevant interest rate changes including various reductions. These rates have remained unchanged since the fourth quarter of last year, but the interest rates starting on January 1, 2025, will now change. To help clients, prospects, and others, Klatzkin has provided a summary of the key changes below.
2025 Interest Rate Changes
- For individuals, 7% per year for overpayments (payments made in excess of the amount owed) and underpayments (taxes owed but not fully paid), compounded daily.
- 6% for overpayments for corporations.
- 4.5% for the portion of a corporate overpayment exceeding $10,000.
- 7% for corporate underpayments.
- 9% for large corporate underpayments.
The interest rate is determined on a quarterly basis under the Internal Revenue Code. The recently-announced rates were computed from the federal short-term rate that was determined during October 2024.
For corporations, the underpayment rate is generally the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. For large corporate underpayments, the interest rate is the federal short-term rate plus 5 percentage points. For the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period, the rate is the federal short-term rate plus half a percentage point.
For all other taxpayers, the overpayment and underpayment rates are the federal short-term rate plus 3 percentage points.
Contact Us
If you have questions about the information outlined above or need assistance with another tax or accounting issue, Klatzkin can help. For additional information call 609-890-9189 or click here to contact us. We look forward to speaking with you soon.