IRS Interest Rates Stay the Same for Q3 2025: What You Need to Know
Every year, the IRS (Internal Revenue Service) adjusts interest rates. These rates affect things like unpaid taxes, refunds, and even how much people owe if they miss payments. For the third quarter of 2025, the IRS has decided to keep these interest rates the same. But what does this mean for you? Let’s break it down.
What Are IRS Interest Rates?
When you owe taxes to the IRS, or if the IRS owes you a refund, interest comes into play. Interest is extra money that is added to what you owe or what the IRS owes you. The IRS sets these rates based on certain rules, and they can change every quarter.
For example, if you owe money to the IRS and you don’t pay it on time, they add interest to your balance. The same thing happens if they owe you money for a refund, although you may get extra money if they delay your payment.
How Does the IRS Set Interest Rates?
The IRS calculates interest rates based on the federal short-term rate. This rate is set by the U.S. government, and the IRS adds a little extra to it to determine the rates for taxes and refunds.
Each quarter, the IRS reviews these rates and decides if they should go up, go down, or stay the same. For the third quarter of 2025, the IRS has decided to keep these rates the same, which means no changes in how much interest you’ll pay or receive. But, what does this really mean for taxpayers like you?
What Does It Mean for Taxpayers?
If you are someone who owes taxes, this announcement might not be great news. It means you will continue to pay interest on your unpaid taxes at the current rate. On the other hand, if you are waiting for a refund, this could be good news for you. The IRS will still be paying you interest on any delays, but it won’t be a larger amount than you expected.
It’s important to understand that interest is added each month to your balance. So, if you have unpaid taxes, the longer you wait to pay them, the more interest you will owe. If you owe a large amount of money, this could add up quickly, which is why it’s always best to pay your taxes as soon as possible.
How Will This Affect Taxpayers’ Refunds?
For most people, the IRS will pay interest on refunds that are delayed by more than 45 days. If you filed your tax return and the IRS takes longer than expected to process it, you may receive interest on that refund.
However, this interest is not a large amount. For example, you might only get a few dollars of extra money if your refund is delayed for a month or two. But if the IRS decides to keep interest rates the same, it means you won’t see a big boost in the amount of interest you get.
How Do Interest Rates Affect Your Tax Payments?
If you owe taxes and don’t pay on time, the IRS adds interest to your debt. This means that the longer you wait, the more you owe. For example, if you owe $1,000 in taxes and wait a month to pay, you could owe a few extra dollars in interest. If you wait a few months, that amount could go up.
The interest rates for the third quarter of 2025 are the same, so it’s a good idea to pay your taxes on time to avoid paying more than you owe. Even though the rates haven’t changed, you’ll still want to avoid letting your debt grow.
What Happens If You Don’t Pay Your Taxes on Time?
If you don’t pay your taxes on time, the IRS can charge interest and penalties. These charges are added to what you owe, and they keep growing until you pay.
- Interest: This is the extra money the IRS adds to your balance. It’s based on the federal short-term rate, which is reviewed each quarter.
- Penalties: These are additional fees that the IRS can charge. If you don’t file your taxes on time, they can charge a penalty for missing the deadline. They can also charge a penalty if you don’t pay the amount you owe.
If you want to avoid both interest and penalties, you should make sure you file your tax return on time and pay what you owe by the due date. The longer you wait to pay, the more expensive it can get.
Why Is the IRS Keeping Interest Rates the Same?
The IRS reviews interest rates every three months to make sure they are fair and in line with other financial factors. In the past, these rates have gone up or down based on how the economy is doing. But for the third quarter of 2025, the IRS decided that the rates should stay the same.
This decision could be based on how the economy is performing right now. The IRS might not want to add extra financial pressure to people who owe taxes, especially if they are already dealing with other costs. Keeping the rates the same also helps keep things predictable for taxpayers.
What Should You Do Next?
If you owe taxes or are waiting for a refund, there are a few things you can do:
- Pay your taxes on time: The best way to avoid paying interest is to pay your taxes as soon as you can.
- Check your refund status: If you think your refund is delayed, you can check the status on the IRS website or use the "Where’s My Refund?" tool.
- File your taxes early: Filing your taxes early can help you avoid penalties and reduce the chances of paying interest.
The IRS keeping interest rates the same is a reminder that staying on top of your taxes is always the best choice. By paying attention to deadlines and making sure you file your taxes correctly, you can avoid any surprises.