A charitable gift annuity (CGA) is a hybrid: part charitable gift, part lifetime income contract. You transfer assets to a charity, the charity pays you a fixed income for life, and when you die, the remaining assets support the charity’s mission. The structure offers meaningful tax benefits — but it is not the same as a commercial annuity, and the risks are different.
How a Charitable Gift Annuity Works
- You make an irrevocable gift — typically $10,000–$500,000 in cash or appreciated assets — to a qualified charity
- The charity agrees to pay you (and optionally a second beneficiary, such as a spouse) a fixed dollar amount annually for life
- At death, the remaining assets belong to the charity permanently
- You receive a partial charitable deduction in the year of the gift
Unlike a commercial annuity from an insurance company, a charitable gift annuity is a general obligation of the charity itself — not backed by an insurance contract. The charity invests the donated assets to fund the future payments.
2026 ACGA Suggested Payout Rates
The American Council on Gift Annuities (ACGA) publishes suggested maximum payout rates. These rates are set so that approximately 50% of the donated amount remains for the charity at the donor’s death (based on actuarial assumptions).
| Age at gift | Suggested single-life rate | Monthly income per $100,000 |
|---|---|---|
| 60 | 5.7% | ~$475 |
| 65 | 6.3% | ~$525 |
| 70 | 7.0% | ~$583 |
| 75 | 8.1% | ~$675 |
| 80 | 9.8% | ~$817 |
| 85 | 11.6% | ~$967 |
| 90 | 13.3% | ~$1,108 |
Important: Rates listed are the ACGA’s suggested maximum. Individual charities may offer lower rates and are not required to follow ACGA guidelines. Rates are updated periodically by ACGA. Verify current rates directly with the charity or at ACGA-web.org.
Tax Benefits of a Charitable Gift Annuity
1. Charitable Deduction
You receive an immediate charitable deduction in the year of the gift. The deduction equals the donation amount minus the present value of the expected annuity payments (calculated using IRS Section 7520 rate and actuarial tables from IRS Publication 1457).
Example:
- Donation: $100,000 at age 70
- Expected payout: 7.0% = $7,000/year
- Present value of payments (at IRS 7520 rate): ~$65,000
- Charitable deduction: $100,000 - $65,000 = $35,000
- Subject to AGI deduction limits (typically 60% of AGI for cash gifts; 30% for appreciated property)
2. Exclusion Ratio — Partial Tax-Free Income
Each annuity payment is split into:
- Tax-free return of basis (the exclusion ratio portion)
- Ordinary income (the gain component)
The exclusion ratio is calculated based on your cost basis and IRS life expectancy tables. Once your full cost basis is recovered, 100% of payments are ordinary income.
3. Capital Gains on Appreciated Property
If you donate appreciated stock or real estate instead of cash:
- You avoid immediate capital gains recognition on the full gain (unlike an outright sale)
- The capital gains are instead spread over your life expectancy via the annuity payments — a much smaller annual tax hit
- You also receive the charitable deduction on the gift amount, not just your cost basis
This can be particularly powerful for donors holding highly appreciated, low-basis assets who need income.
Key Differences From Commercial Annuities
| Feature | Commercial annuity | Charitable gift annuity |
|---|---|---|
| Backed by | Insurance company | Charity’s general assets |
| FDIC or state guaranty? | State guaranty association | No — charity’s financial health only |
| Contribution limit | None | None |
| Charitable deduction | No | Yes (partial) |
| What happens at death | Death benefit to heirs or stops | Residual goes to charity |
| Primary motivation | Income and/or investment | Charitable giving + income |
| Payout rate | Market-driven | ACGA-suggested rate |
Risks to Understand
Charity financial health: Payments depend entirely on the charity’s financial stability. There is no FDIC, no state guaranty association, and no insurance company backing the obligation. Before making a CGA, review the charity’s IRS Form 990, financial statements, and credit rating if available.
Irrevocability: Once you make a charitable gift annuity, the gift is permanent. You cannot get the assets back.
Inflation: Like commercial fixed annuities, charitable gift annuity payments are fixed — they do not adjust for inflation.
Charitable gift annuities combine income and giving — a specialist topic within the annuities hub. Understand how income annuities work in what are income annuities, and see how this fits estate planning strategy at the estate planning hub.
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