Charitable Gift Annuity

Taxation of Gift Annuities and Deferred Gift Annuities

A portion of each annuity payment is excluded from income as a return of principal; the rest of the annuity payment is taxed as ordinary income.(1)  If your projection runs beyond the life expectancy of the annuitant(s), previously tax-free income is taxed as ordinary income.  If the donor qualifies to report the gain that results from the establishment of the annuity over the donor's lifetime, part of the excludable portion will be taxed as capital gain until all of the gain has been reported.(2)  Capital gains tax is assessed at the lesser of the rate you enter for the beneficiary's incom

Unlocking the Mystery of the Taxation of Charitable Gift Annuity Payments: Part III

In this last of three articles on the gift annuity, we will discuss the taxation of gift annuity payments. Unlike remainder trusts, the taxation of gift annuity payments is determined at the time the annuity is established. This taxation is unaffected by the actual investment performance of the donated assets. Annuities funded with cash make payments that are considered partially tax-free return of principal and partially ordinary income. Donors who fund an annuity with appreciated property must also report a certain amount of capital gain income.

Unlocking the Mystery of the Charitable Gift Annuity Income Tax Deduction: Part I

The bread and butter of planned giving programs for most non-profits is the charitable gift annuity (CGA). The CGA is easy to establish, simple to administer, and leaves a generous gift to charity. This article is the first in a three part series on CGA deductions and taxation.

In this article, we will examine the calculation of the CGA charitable income tax deduction and the variables that affect this calculation. We will discuss how you can maximize your donor's income tax deduction in a low discount rate environment.

Offering Gift Annuities in the Current Economy

In response to widespread concern regarding the current financial atmosphere, many of our clients are expressing anxiety specifically about their gift annuity programs. Accordingly, we offer the following thoughts regarding gift annuity rates, the reserves backing your annuities, the investment of your gift annuity fund, and additional considerations regarding offering gift annuities in the current environment.

Locating the Reserve State

A number of states, including California and New York, require charities to maintain a minimum reserve to back their gift annuity payment obligations. The rules regarding which annuities to include in a state’s minimum reserve computation can depend on the reserve state associated with the annuity.

Terminating a Gift Annuity While an Annuitant Is Still Living

In the vast majority of cases, a gift annuity will not end until the death of the sole or surviving recipient of the payments. Annuitants are generally delighted that they will continue to receive payments for life, and they wouldn’t have it any other way. Yet, in certain instances an annuitant might be pleased to learn some options exist.

A Gift Plan for the Donor Who Wants Payments to Grow, Risk-Free

One of the reasons gift annuities are so popular is that they offer donors payments that are fixed and are backed by the general resources of the issuing institution.  The resulting predictability and security of annuity payments has strong appeal for a broad range of planned gift donors.  The age of the donors has a lot to do with this appeal.