What is the AFR for a family loan?

The AFR depends on term: short-term up to 3 years, mid-term 3 to 9 years, long-term over 9 years. As of November 2026 the annual AFRs are 4.67% short-term, 5.08% mid-term, and 5.52% long-term. The IRS updates them monthly.

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Family Loan Calculator

Q: How do you keep a family loan from being treated as a gift?

Use a written promissory note, a real repayment schedule, and interest at or above the AFR. Without them, a loan that's never repaid can be reclassified as a gift.

This free family loan calculator shows the monthly payment, the total interest, and the lowest rate the IRS expects you to charge on an intra-family loan: the Applicable Federal Rate (AFR). It also tells you if your rate creates a gift-tax issue. Enter the amount, term and rate, then download the amortization schedule.

Your loan

Loan amount

Term (years)

Interest rate (% per year)

Minimum IRS rate (AFR) for this term: 5.52% .

What it looks like

Monthly payment—

Total interest—

Total repaid—

Counts as a gift, once—

Year-by-year breakdown

Payments, principal, interest, and the balance left at the end of each year.

Year	Payments	Principal	Interest	Ending balance

Get your full schedule as a spreadsheet. Every month's payment, principal, interest, and balance, plus the one-time gift, built from your numbers.

Don't run it on a spreadsheet.

Family Matters reads the terms from your signed agreement, logs every payment, tracks the balance both of you can see, and prepares the year-end records your CPA needs. Try it free for 45 days.

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How family loans and the AFR work

Do you have to charge interest on a family loan?

Yes, on loans above $10,000. The IRS expects at least the Applicable Federal Rate (AFR), a minimum rate it publishes every month. Charge at least the AFR and the loan is a real loan. Charge less (including 0%), and the IRS treats the interest you didn't charge as a gift from you to the borrower.

What is the AFR, and which one applies?

The AFR depends on the loan's term: short-term for loans up to 3 years, mid-term for 3 to 9 years, and long-term for over 9 years. As of November 2026 (IRS Rev. Rul. 2026-21), the annual AFRs are 4.67% short-term, 5.08% mid-term, and 5.52% long-term. The IRS updates these monthly - check the current month before you sign.

What happens if you charge below the AFR?

The difference between the AFR and what you actually charge is a gift to the borrower. On a loan with a set term, it's counted once, the day you lend: the amount you lend, less what the payments are worth today at the AFR. If that, plus your other gifts to that person that year, stays under the annual gift exclusion ($19,000 per recipient in 2026), there's no filing. Above it, you'll likely file a Form 709. You still probably won't owe tax; it just draws down your lifetime exemption.

Loan or gift - how do you keep it a loan?

Three things make it a loan in the eyes of the IRS: a written promissory note, a real repayment schedule, and interest at or above the AFR. Without them, a "loan" that never gets repaid can be reclassified as a gift. Family Matters keeps that paperwork and logs every payment against the schedule.

Part of the guide to intra-family loans: when they make sense, the rules that keep them a loan, and how to set one up.

This calculator is general information, not tax or legal advice. AFRs change every month, so check the current rate with the IRS, and talk to your CPA or attorney before you set up a loan.

Advise families or run a finance site? This calculator is free to embed on your own site.