Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Updated August 3, 2026. Quick answer: a charitable gift annuity is a trade. You give a charity an asset; the charity promises to pay you a fixed amount for the rest of your life. Part of what you transferred is a gift and part is a purchase, and the tax code treats it exactly that way — as a bargain sale. Whether it is a good trade for you depends on numbers this page will help you assemble, not on how it is described.
A note on sources, because it matters here. Almost everything written about gift annuities is written by an organisation that would like to receive one. We are not selling one and not arguing against one. Below is what the statute and regulation say, what you are giving up, and which questions to ask.
What it actually is
Two transactions in one document. The portion representing what the annuity is worth is a sale; the excess you handed over beyond that is a gift. That split drives the tax treatment.
If a deduction is allowable under section 170 (relating to charitable contributions) by reason of a sale, then the adjusted basis for determining the gain from such sale shall be that portion of the adjusted basis which bears the same ratio to the adjusted basis as the amount realized bears to the fair market value of the property.
— 26 U.S.C. §1011(b)
And the regulation says in terms that this applies to an annuity arrangement:
Section 1011(b) and this section apply where property is sold or exchanged in return for an obligation to pay an annuity and a charitable contributions deduction is allowable under section 170 by reason of such sale or exchange.
— 26 CFR §1.1011-2
The practical consequence: if you fund it with appreciated property, you do not escape the gain entirely. Your basis is split in the same proportion as the sale portion bears to the whole, and gain on the sale portion is reportable. It is a reduction, not an exemption.
What you give up
- The asset, irrevocably. This is not reversible and there is no surrender value. If your circumstances change, the arrangement does not.
- Any upside. The payment is fixed. If the asset would have grown, that growth belongs to the charity now.
- Purchasing power, unless the contract says otherwise. A fixed payment for life is a fixed payment through whatever inflation happens over that life.
- Diversification of the promise. The payment is backed by the charity, not by an insurer and not by a guaranty association. The relevant question is the charity’s financial strength, and whether your state regulates gift annuities and requires reserves.
What you get
- A fixed payment for life, beginning now or deferred.
- A charitable deduction for the gift portion, subject to the ordinary deduction limits.
- Gain on the sale portion generally spread rather than recognised all at once, where the arrangement qualifies.
- A gift to an organisation you chose, completed in your lifetime.
On the rates
Most charities follow suggested rates published by a private association rather than competing on price. We are not printing a rate here. They are set by that association, they change periodically, and a number in an article is exactly the kind of figure that goes stale and misleads. Ask the charity for its current rate for your age, in writing, and compare it against what a commercial immediate annuity would pay you — the difference is, in substance, the size of your gift.
The questions to ask before signing
- What is the rate for my age, and is it the association’s suggested rate or the charity’s own?
- What would a commercial immediate annuity pay me for the same amount?
- Is my state one that regulates gift annuities, and does this charity meet its reserve rules?
- What is the charity’s financial condition, and what happens to my payment if it fails?
- What exactly is my deduction, and how much gain will I report in year one?
Question 2 turns a good feeling into a number.
Question 2 is the one people skip, and it is the one that turns a vague good feeling into a number.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. The matching service is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here. You stay on this page.
What happens when you press the button
It requests contact details and phone verification by text. Nothing loads and nothing reaches Kapitalwise until you press the button. Submitting the form does not guarantee an adviser or a match.
Honest gaps
Deduction calculations depend on IRS discount rates and actuarial factors we have not reproduced here, and state regulation of gift annuities varies considerably. This page states the statutory character of the transaction; the arithmetic for your situation needs your actual numbers.
Related: giving retirement money instead · qualified charitable distributions.
General information drawn from the Internal Revenue Code, Treasury regulations, IRS publications and the relevant state statutes, not legal or tax advice. Dollar figures are adjusted regularly and the state-law half differs from state to state, so check the current year and your own state before you act on a number.