What interest on a tax refund is
Interest on a tax refund is money the IRS or your state tax agency pays you when they hold your refund longer than the law allows. It is not a bonus or a reward — it is compensation for the government's use of your money. The IRS is required by law to pay interest on refunds that are not issued within a set timeframe, typically 45 days from the date you filed your return or the return was due, whichever is later.
The interest rate changes quarterly and is set by the IRS based on the federal short-term rate plus 3 percentage points. For the first quarter of 2024, the rate was 8 percent per year. For the second quarter, it dropped to 7 percent. These rates apply to both federal and state refunds in most cases, though some states set their own rates.
Interest accrues daily from the date the refund should have been issued. If your refund is delayed by three months, you earn interest for those three months. If it is delayed by six months, you earn interest for six months. The longer the delay, the more interest you receive.
Key Takeaways
- Interest on a tax refund is paid by the IRS or your state when your refund is delayed beyond the legal timeframe, usually 45 days.
- The interest rate is set quarterly by the IRS and currently ranges between 7 and 8 percent per year, though rates change and vary by state.
- Interest accrues daily from the date your refund should have been issued, so longer delays mean more interest owed to you.
- You do not need to do anything to receive interest — the IRS or state automatically includes it when they issue your refund.
- Interest is reported on a separate Form 1098-T or included in your refund check, depending on the agency and the amount.
When the IRS or state owes you interest
The IRS owes you interest when your refund is not issued within 45 days of the later of two dates: the date you filed your return or the date your return was due. If you file on February 15 and your return was due April 15, the 45-day clock starts on April 15. If you file on May 1 and your return was due April 15, the clock starts on May 1.
Not all delays trigger interest. The IRS does not owe interest if the delay is caused by you — for example, if you filed a return with missing information and the IRS had to contact you for clarification, the clock pauses while they wait for your response. Interest also does not accrue during the time the IRS is processing a legitimate claim for refund, such as an amended return or an installment agreement.
State tax agencies follow similar rules but may have different timeframes. Some states require refunds within 30 days; others allow 60 days. Check your state's tax agency website to learn the specific deadline in your state.
How much interest you will receive
The amount of interest depends on three things: the size of your refund, the interest rate in effect during the delay, and how long the delay lasted. A $2,000 refund delayed by 90 days at 7 percent interest would earn roughly $35 in interest. A $5,000 refund delayed by the same period would earn roughly $87.
Interest is calculated daily, so the exact amount depends on the number of days between when your refund should have been issued and when it actually was. The IRS or your state will calculate this automatically — you do not need to do the math yourself.
If your refund was delayed across multiple quarters when the interest rate changed, the IRS applies the rate that was in effect for each day of the delay. This means your interest calculation may use two or three different rates depending on when the delay occurred.
How you receive interest on your refund
Interest is paid automatically when your refund is issued. You do not need to request it or take any action. The IRS or your state will include the interest in your refund check or direct deposit, or they will send it separately depending on the amount and the agency's procedures.
For federal refunds, if the interest is $1 or more, the IRS typically includes it in your refund check or deposit. If the interest is less than $1, they may round down to zero. Some states have different thresholds — check your state tax agency's rules if you want to know the exact cutoff.
You may receive a notice or statement showing the interest amount separately from your refund. This is informational and helps you understand how much interest accrued and why. Keep this notice for your records in case you need to reference it later.
Interest on state refunds
State tax agencies are required by state law to pay interest on delayed refunds, but the rules vary by state. Some states use the same interest rate as the federal government; others set their own. Some states have a shorter deadline than 45 days, which means interest may start accruing sooner.
A few states do not pay interest on refunds at all, or they pay interest only in certain circumstances. Check your state's tax agency website or call their refund line to learn the specific rules in your state. The state tax agency can tell you whether your refund qualifies for interest and approximately how much you should receive.
If you filed a joint return and your state has community property laws, interest may be divided between spouses according to state law. This is handled automatically by the state tax agency.
What to do if you do not receive interest you are owed
If your refund was delayed but you did not receive interest, first check whether the delay was long enough to trigger interest under the law. The 45-day clock (or your state's equivalent) must have passed before interest is owed. If it did, contact the IRS or your state tax agency and ask why interest was not included.
For federal refunds, you can call the IRS at 1-800-829-1040 or check your refund status using the Where's My Refund tool on IRS.gov. Have your Social Security number, filing status, and the refund amount ready. If the IRS confirms that interest should have been paid, they can issue it to you separately.
For state refunds, contact your state's tax agency directly. Most states have a refund hotline or an online tool to check refund status. If the state confirms the delay and that interest was owed, they will issue it to you, usually within 30 days of your request.
Interest on amended returns and refund claims
If you filed an amended return (Form 1040-X) or claimed a refund after the original return was processed, the 45-day clock restarts from the date the IRS receives your amended return or claim. Interest does not accrue on the original refund during the time your amended return is being processed — only on the additional refund amount, if any, once the amended return is approved.
The same rule applies to state amended returns. The interest clock starts over when the state receives your amended return, not when you originally filed.
If you are owed a refund as a result of an IRS audit or examination, interest accrues from the date you originally filed your return, not from the date the audit ended. This can result in a significant interest payment if the audit took a long time to complete.
Frequently Asked Questions
Do I have to pay taxes on the interest I receive from my refund?
No. Interest paid by the IRS or a state tax agency on a delayed refund is not taxable income. You do not report it on your next tax return, and the IRS does not send you a Form 1099 for it. This is one of the few types of interest that is not subject to federal income tax.
What if my refund was delayed because I made a mistake on my return?
If the IRS had to contact you to correct an error or request missing information, the 45-day clock pauses while they wait for your response. Once you provide the information, the clock resumes. Interest accrues only for the days after the clock resumes, not for the days the IRS was waiting for you.
Can I get interest on a refund that was delayed by the post office?
If you received a direct deposit, the delay was not caused by the post office. If you received a check by mail and it was lost or delayed in transit, the IRS or state is not responsible for the delay. Interest is owed only for delays caused by the tax agency, not by mail delivery.
How long does it take to receive interest after my refund is issued?
Interest is included in your refund when it is issued. If your refund arrives by direct deposit, the interest arrives with it. If you receive a check, the interest is included in the check amount. You do not have to wait for interest to be paid separately.
What is the current interest rate on tax refunds?
The IRS sets the interest rate quarterly. As of early 2024, the rate was between 7 and 8 percent per year, depending on the quarter. The rate changes on January 1, April 1, July 1, and October 1 each year. Check IRS.gov for the current rate if you need the exact figure for your refund.