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You would also generate a $30,539 charitable income tax deduction that you can claim on your tax return this year. If, today, you purchase a joint CGA for $100,000 (paid in cash), payable over the lifetimes of you and your spouse, and you are 75 and your spouse is 70, with payments made to you on an annual basis, you and your spouse would receive an annual payment $5,200 until the second death (this assumes the charity you purchase the annuity from uses the interest rate supplied by the American Council on Gift Annuities of 5.2% applicable to this fact pattern). If, instead, you claim the standard deduction in the year you purchase a CGA, you won’t receive any income tax benefits as a result of purchasing the contract. You receive an income tax benefit from the purchase of a CGA only if you itemize deductions on your tax return. The value of the expected contract payments is calculated using an interest rate and calculation method provided by the Internal Revenue Service. The income tax deduction you can claim on your tax return equals the amount paid for the CGA minus the actuarially calculated value of the payments expected to be made under the contract. At the time you purchase the annuity contract, you are entitled to a charitable income tax deduction. In addition to the payments you receive from the CGA, there are potential income tax benefits from the purchase of a CGA. However, the amount charity actually ends up with after the annuity payments cease depends upon the investment returns generated by the charity. Charitable gift annuities pay less than commercial annuities, and are usually designed so that it is probable charity will receive fifty percent of the amount paid for the contract when the annuity payments cease. In calculating the annuity payable, most charities use an interest rate supplied by the American Council on Gift Annuities (and most states regulate a charity’s issuance of CGAs). The interest rate used to calculate the payment depends upon the age (or ages) of the annuitant(s). The length of time over which the payments are expected to be made depends upon the annuitant’s (or annuitants’) life expectancy(ies). The amount payable under the contract depends on how much you pay for the contract, the interest rate used to calculate the annuity payments due, and the expected length over which the payments will be made. The terms of the annuity contract require the charity to pay to you (or you and one other person, such as your spouse) a fixed sum of money over either your lifetime or the joint lifetimes of you and one other person (such as your spouse).

Charitable Gift Annuities DescribedĪ charitable gift annuity (CGA) is similar to a commercial annuity, but you contract with a charity instead of an insurance company for the annuity payment.

This post discusses Charitable gift annuities check back next month for my post on charitable remainder trusts. The second is a charitable remainder trust (CRT). What if you would like to benefit charity, but because you need the income stream they provide you aren’t comfortable parting with your assets? Two charitable techniques are available that may meet your needs.