The Internal Revenue Service has released the Applicable Federal Rates (AFRs) for October 2020. 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 October 2020:

Annual

Semiannual

Quarterly

Monthly

Short-term

0.14%

0.14%

0.14%

0.14%

Mid-term

0.38%

0.38%

0.38%

0.38%

Long-term

1.12%

1.12%

1.12%

1.12%

The Section 7520 interest rate for October 2020 is 0.4 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.

For more information about possibly taking advantage of these low AFRs, please contact someone in our Trusts & Estates group.

Find the full revenue ruling for October 2020 here.

This article was written by Greensfelder Trusts & Estates Practice Group