The IRS pays interest on refunds, but the rate changes every three months

When the IRS owes you money because you overpaid your taxes, they pay you back with interest — a small amount of extra money as compensation for holding your funds. The interest rate is not fixed. The IRS sets a new rate every quarter (January, April, July, and October), based on a formula tied to short-term government borrowing rates. For most of 2024, the rate has been between 8% and 9% annually, though it varies by quarter and can be lower or higher depending on economic conditions.

The interest only applies if your refund is delayed beyond a certain point. If the IRS processes your return and sends your refund within 45 days of receiving it, you get no interest — just your refund. Interest begins to accrue on day 46 if your refund is still pending. This is rare for straightforward returns filed electronically, but it happens when the IRS needs to verify information, investigate a discrepancy, or process a paper return.

Key Takeaways

  • The IRS interest rate on refunds changes every three months and is set by federal law, not by the IRS alone.
  • You only receive interest if your refund is delayed more than 45 days after the IRS receives your return.
  • The interest rate for the current quarter is published on the IRS website and applies to all delayed refunds during that period.
  • Interest accrues daily from day 46 onward until the IRS sends your refund, and you do not have to claim it separately on a future return.

How the IRS calculates the quarterly interest rate

The IRS does not choose the interest rate on a whim. Federal law requires the rate to equal the federal short-term rate plus 3 percentage points. The federal short-term rate itself is set by the U.S. Department of the Treasury and changes based on what the government pays to borrow money for short periods. When the Treasury's borrowing costs rise, the IRS refund interest rate rises with it. When borrowing costs fall, so does the refund rate.

The IRS announces the new rate on or before the 15th of December, March, June, and September, and the rate takes effect on the first day of the following quarter. You can find the current and past rates on the IRS website under "Interest Rates" or by calling the IRS at 1-800-829-1040. The rate applies to all refunds delayed during that quarter, regardless of when you filed or when the delay began.

When you actually receive the interest payment

The IRS does not send interest as a separate check or deposit. Instead, it is added to your refund amount. If you are owed $2,000 and the IRS takes 90 days to send it, you will receive $2,000 plus the accrued interest — perhaps $2,035 or $2,040, depending on the rate and exact number of days delayed. The interest appears as part of your total refund, not itemized separately.

You do not have to report this interest on your next tax return or do anything special to receive it. The IRS calculates it automatically and includes it in the payment. If you receive your refund by check, the check amount includes the interest. If you receive it by direct deposit, the deposit includes the interest.

Why refunds get delayed past 45 days

Most electronic returns are processed and refunded within two to three weeks. A 45-day delay is uncommon but not unheard of. The IRS may hold a return longer if:

  • You claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) — the IRS is required by law to hold these returns until mid-February, even if filed in January.
  • The return contains math errors or inconsistencies that need verification.
  • Your Social Security number, name, or address does not match IRS records.
  • You file a paper return instead of electronically.
  • The IRS detects potential identity theft or fraud and investigates.
  • You claim a large refund that triggers additional review.

If your return is delayed, the IRS will contact you by mail if they need more information. You can also check the status of your refund using the IRS "Where's My Refund?" tool on IRS.gov or by calling 1-800-829-1040.

The difference between refund interest and penalties or other charges

Refund interest is money the IRS pays to you. It is separate from interest the IRS charges you if you owe taxes and do not pay on time. If you underpaid your taxes and owe money, the IRS charges you interest on the amount owed — currently around 8% to 9% annually as well, though the rate for amounts owed is set separately. These are opposite transactions: one is money in your favor, one is money against you.

Similarly, if the IRS assesses a penalty for filing late or underpaying, that penalty is separate from interest. Penalties are flat fees or percentages charged for specific violations, while interest accrues daily on any unpaid balance. Understanding the difference matters if you are reviewing an IRS notice about money you owe.

What to do if you believe your refund was delayed unfairly

If your return was held longer than 45 days and you believe there was no valid reason, you can contact the IRS to ask about the delay. Call 1-800-829-1040 or visit your local IRS office. Have your Social Security number, filing status, and the date you filed ready. The IRS will explain why the return was held and whether interest has been applied.

If you believe the IRS made an error in calculating the interest owed to you, you can request a recalculation. This is rare — the IRS calculation is usually correct — but if you spot a discrepancy, contact the IRS with documentation of the filing date and the refund date. The IRS will review and correct the interest if warranted.

Frequently Asked Questions

Do I get interest if my refund is delayed because I filed late?

No. Interest only accrues if the IRS takes longer than 45 days to process your return after receiving it. If you file your return on April 1st and the IRS processes it on April 20th, you receive no interest even though you filed late. The 45-day clock starts when the IRS receives your return, not when the tax important date was.

What is the current interest rate on tax refunds?

The rate changes every three months. Visit IRS.gov and search "interest rates" or call 1-800-829-1040 to find the current rate for the quarter. As of early 2024, rates have ranged from 8% to 9% annually, but this varies and may be different when you read this.

Can I claim the refund interest as income on next year's taxes?

No. Refund interest is not taxable income. You do not report it on your next return, and the IRS does not send you a Form 1099 for it. It is straightforward part of your refund.

If I owe taxes and also have a refund coming, does the IRS offset the interest?

The IRS may explore your refund to any taxes, penalties, or debts you owe before sending you the remainder. If they do, the refund interest still applies to the portion that was delayed, but it is calculated on the original refund amount before any offset.

Does the interest rate explore to state tax refunds too?

No. State tax refunds are handled by your state revenue department, not the IRS. Each state sets its own interest rate on delayed refunds, and those rates vary widely. Contact your state tax agency to learn what interest rate applies to your state refund.