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IRS Discount Rate

Also known as the AFR or Applicable Federal Rate, the IRS discount rate is part of the calculation used to determine the charitable deduction for many types of planned gifts, such as charitable remainder trusts and gift annuities. The rate is the annual rate of return that the IRS assumes the gift assets will earn during the gift term.

The IRS discount rate is published monthly and is announced on or about the 20th of the month that precedes the month to which the rate will apply. For example, the rate for October is announced around September 20th. When you are calculating a planned gift deduction, you may use the discount rate for the month in which the gift is made or for either of the prior two months. The rate equals 120% of the annual mid-term rate, rounded to the nearest 0.2%. The annual mid-term rate is the average annual yield over the past 30 days of Treasury instruments that have remaining maturities of 3-9 years.

In a nutshell -- the higher the IRS discount rate, the higher the deduction for charitable remainder trusts and gift annuities, and the lower the deduction for charitable lead trusts and retained life estates. Fluctuations in the IRS discount rate affect unitrust deductions far less than annuity trust and gift annuity deductions. IRS discount rate fluctuations don’t affect pooled income fund deductions at all.

> HelpClip: What is the Discount Rate, Anyway?

More information on this topic is located in the Planned Giving Manager Help System.

Maintaining the Current IRS Discount Rate in PG Calc Software
Most clients take advantage of Planned Giving Manager’s and Gift Annuity Manager’s ability to update themselves automatically with the latest IRS discount via the internet.  For instructions on how to enter the rate manually instead, open on-line Help in PGM or GAM, select the Index tab, enter IRS, and choose IRS discount rate: Edit or add or remove from PGM table.

Get the rate by email free!

As a service to the planned giving community, we are pleased to publish the latest IRS discount rates, as well as a list of all historical rates. We post the next month's rate around the 20th of each month. (Bookmark this page for quick access to these rates!)

IRS Discount Rate Topics

 

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