Charitable Gift Annuities anyone???

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Charitable Gift Annuities anyone???

Post by Rosa » Thu Feb 21, 2019 11:42 pm

Hello, does anyone here actually have a Charitable Gift Annuity? I do and have a question or two about them. I read there are several tax discounts and at some certain time are tax free on the payments, but, I wonder whether the lump sum given to the charity is also tax deductible or tax free?

I know I must consult with a CPA who also specializes in this type of annuities, but I've been disappointed in some professionals so I'm now kind of afraid to spend more money and time on one... :( and decided to try the forums for now.

Thanks so much for any help. :)

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Re: Charitable Gift Annuities anyone???

Post by bluquark » Fri Feb 22, 2019 12:28 am

In general, the way all of these products work is that you can take a deduction the value of the amount that is not going back to you as income. The amount deductible is neither zero nor the full amount of the lump sum, but rather involves complicated calculations to figure out the NPV of the income stream that you need to subtract from the lump sum.

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Re: Charitable Gift Annuities anyone???

Post by HIinvestor » Fri Feb 22, 2019 12:45 am

An example is, supposed you donate $10,000 to charity x. They agree to pay you $750/yr for life and your CPA calculates the current value of that income stream at $5000, so your deductible tax amount would be $5000.

Of course you have to see whether you can even deduct whatever the tax deductible amount is under the new tax reform law with the larger standard deduction.

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Re: Charitable Gift Annuities anyone???

Post by Gill » Fri Feb 22, 2019 8:54 am

The older you are the larger the charitable deduction. The payouts are never as good as an SPIA, but this is partially offset by the ability to deduct the value of the charity’s interest. There are IRS tables that give you these values.
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Re: Charitable Gift Annuities anyone???

Post by grabiner » Fri Feb 22, 2019 11:01 pm

As is usual with a combined financial product, these are only a good deal if you want both parts.

If you want to donate a lot of money to a charity, and get an annuity for retirement income, then a charitable gift annuity is a good deal. The alternative would be to donate cash (or stock) to the charity, and buy a retail annuity, but this would likely not be as good a deal; you would need to pay more to get the same charitable benefit and buy the retail annuity.

One caution: check the tax benefit you will actually get. Most charitable gift annuities are large enough that you will itemize deductions and get most of the money deducted, possibly over several years. However, if you are at least 70-1/2, you may get a much better tax benefit by using your IRA to make a Qualified Charitable Distribution to the charity instead. This distribution can satisfy your RMD. In addition, it is not included in your income, which is better than getting a deduction; it is not counted as income for making Social Security taxable or increased Medicare premiums, and it is fully deductible, while an itemized deduction gives a benefit only to the extent that it exceeds your standard deduction.
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Re: Charitable Gift Annuities anyone???

Post by inbox788 » Sun Feb 24, 2019 3:37 am

Yes, the charitable donation is deductible. In the example below, a $10k donation let's you deduct $3.33k.

I've looked into it, but haven't completely understood the complexities and tradeoffs. The tax-free vs capital gains vs. ordinary income are particularly confusing and difficult to value. I've come across some calculators like this one that may be helpful: ... es/74.html

I don't know how accurate these estimates are, but may be useful to get an idea as to what to ask.

Code: Select all

Charitable Gift Annuity Calculator Results

Your Benefits 
Annual Payout:	$470.00	
Ordinary Income:	$193.41	
Tax Free Portion:	$276.59	
Reportable Capital Gain Income:	$0.00	
Charitable Deduction:	$3,334.11	
Tax Advantage:	$333.41	
Payment Rate:	4.7%	

Your Situation
Income Recipient Age:	60	
Gift Amount (Cash) :	$10,000.00	
Cost Basis:	$10,000.00	
Gift Date:	2/24/2019	
Date Payments Begin:	3/31/2019	
You Receive Payments:	Quarterly	
IRS Discount Rate:	3.6%	


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