The IRS pays interest on delayed federal tax refunds at a rate set each quarter

The federal tax refund interest rate changes every three months and is tied to the short-term federal rate plus 3 percentage points. For 2024, the rate has ranged from 8% to 9% per year, depending on the quarter. The IRS announces the new rate in early January, April, July, and October each year.

Interest accrues from the original due date of your return (usually April 15) until the IRS issues your refund. If you file early and the IRS holds your return for processing, interest still starts from April 15, not from when you filed. This means you earn interest on money the government owes you, even if you filed months earlier.

The interest is calculated daily and added to your refund check or direct deposit. You do not have to do anything to receive it — the IRS computes it automatically. However, the amount is often small because most refunds are issued within weeks, not months.

Key Takeaways

  • The IRS interest rate on refunds changes quarterly and is currently between 8% and 9% per year, though this varies by quarter and year.
  • Interest begins accruing on April 15 (the original tax deadline) regardless of when you file, and continues until your refund is issued.
  • The IRS calculates and adds interest automatically — you receive it with your refund without taking any action.
  • Most refunds arrive within 21 days of filing, so the interest amount is typically small, often less than $10.
  • State tax refunds have their own interest rates, which vary by state and are usually lower than the federal rate.

How the IRS calculates the interest amount

The calculation is straightforward: the IRS multiplies your refund amount by the interest rate, then divides by 365 to get a daily rate. That daily amount is multiplied by the number of days from April 15 until your refund is issued. For example, if you are owed $2,000 and the rate is 8% annually, and your refund takes 30 days to process, you would earn roughly $16 in interest.

The interest is compounded daily, meaning you earn interest on the interest. In practice, this makes almost no difference on refunds that arrive within a month or two. The real impact only appears when the IRS delays your refund significantly — for instance, if you claim the Earned Income Tax Credit (EITC) or Child Tax Credit, which the IRS holds until mid-February by law.

You can find the exact interest rate for any quarter on the IRS website under "Interest Rates." The page lists rates going back several years, so you can look up what rate applied when your refund was issued.

When refund delays trigger larger interest payments

Most refunds arrive within 21 days, so interest is minimal. But certain situations cause the IRS to hold your return longer, and that is when interest adds up. If you claim the EITC or Additional Child Tax Credit, the IRS must hold your refund until at least February 15 by law — this is called the PATH Act requirement. A refund held from April 15 to mid-February the following year accrues interest for nearly a full year.

Refunds are also delayed if the IRS needs to verify information on your return — for example, if your income does not match what employers reported, or if you claim a large deduction the IRS wants to review. These verifications can take several months. During that time, interest continues to accrue at the quarterly rate in effect when your refund is finally issued.

If the IRS makes an error and issues your refund late, you still receive interest. The IRS does not distinguish between delays caused by its own processing backlog and delays caused by your return requiring extra review. Interest accrues either way.

State tax refund interest rates vary widely

Each state sets its own interest rate on delayed tax refunds, and these rates are often lower than the federal rate. Some states pay no interest at all on refunds issued within a certain timeframe — for example, within 45 days. Other states pay interest only if the refund is delayed beyond a specific date, such as 90 days after filing.

A few states pay interest rates comparable to the federal rate, while many pay 3% to 5% annually. New York, for instance, pays 7% on refunds delayed more than 60 days. California pays no interest on most refunds but does pay interest on refunds delayed due to the state's own error or processing backlog. You can find your state's rate on your state tax department's website.

State interest is calculated the same way as federal interest — daily compounding from the original due date until the refund is issued. If you are owed both a federal and state refund, you will receive interest on each separately at the respective rates.

Tracking your refund status and interest accrual

You can track your federal refund using the IRS "Where's My Refund?" tool on IRS.gov. Enter your Social Security number, filing status, and the exact refund amount shown on your return. The tool updates once per day and shows the current status — received, processing, approved, or issued — along with the expected deposit date.

The tool does not show interest accrual in real time, but you can calculate it yourself using the quarterly rate that was in effect when your refund was issued. If you want to know the exact interest amount before your refund arrives, contact the IRS at 1-800-829-1040 and provide your return information. A representative can tell you the current status and estimate when the refund will be issued.

For state refunds, use your state tax department's tracking tool. Most states have an online portal where you enter your Social Security number and refund amount. The portal shows the status and expected delivery date, though it rarely displays interest calculations.

What happens if your refund is very late

If the IRS delays your refund more than 45 days after you file, you can request interest even if the IRS has not yet issued the refund. File Form 843 (Claim for Refund and Request for Abatement) with the IRS to request the interest owed. Include your return information, the date you filed, and the date you expect the refund to be issued. The IRS will calculate interest from April 15 through the expected issue date.

If the IRS has already issued your refund but you believe the interest calculation is wrong, you can also file Form 843 to dispute it. Attach a detailed calculation showing the refund amount, the interest rate that should have applied, and the number of days interest should have accrued. The IRS will review your claim and issue a corrected refund if you are right.

In rare cases where the IRS loses your return or makes a serious error, you may be owed interest at a higher rate. The IRS can pay interest at the overpayment rate (currently higher than the standard refund rate) if the delay was caused by the IRS's own mistake. Request this on Form 843 and explain why the IRS is responsible for the delay.

Frequently Asked Questions

Do I have to pay taxes on the interest I receive from my refund?

No. Interest paid by the IRS on a tax refund is not taxable income. You do not report it on your next year's return, and the IRS does not send you a 1099 form for it. This applies to both federal and state refund interest.

What if I filed an amended return — does interest still accrue from April 15?

No. If you file an amended return (Form 1040-X), interest accrues from the date you filed the amended return, not from April 15 of the original year. This is one reason amended returns often result in smaller interest payments than original returns.

Can I get my refund faster to avoid losing interest to inflation?

The interest rate the IRS pays is set by law and does not keep pace with inflation. However, you can file as early as January 1 each year, and most refunds arrive within three weeks of filing. Direct deposit is faster than a paper check — typically 1 to 2 weeks versus 3 to 4 weeks. There is no way to speed up the IRS's processing beyond filing early and choosing direct deposit.

If I owe taxes one year and get a refund the next, does the IRS apply interest to both?

The IRS calculates interest separately for each tax year. If you owed taxes in 2023 and get a refund in 2024, you pay interest on the 2023 debt and receive interest on the 2024 refund. The two do not offset each other — interest is computed independently for each year's return.