Blended Rate for 2022

If you have an outstanding demand loan with an interest rate that’s below the applicable federal rate (AFR), you have interest income if you’re the lender or interest expense if you’re the borrower. Exception: Gift loans up to $10,000 and loans up to $100,000 if the borrower has no investment income can be made interest free with no tax consequences.

An interest free demand loan that’s outstanding for all of 2022 is assumed to have an annual rate of 1.4% (Rev. Rul. 2022-12). This is referred to as a blended rate. For example, say you made an interest-free loan to your business of $20,000, payable on demand, and it remained outstanding for all of 2022. Your interest income for 2022 is $280 ($20,000 x. 1.4%).