A charitable gift annuity is a contract between you and a nonprofit: you make an irrevocable gift of cash or securities, and the charity promises to pay you a fixed amount every year for the rest of your life. It tends to be a good idea for donors in their 70s or older who want predictable income, an upfront tax deduction, and the satisfaction of funding a cause they care about. It tends to be a poor idea for anyone young enough to watch inflation chew through decades of fixed payments, anyone who might need the principal back, or anyone uneasy about tying retirement income to one organization’s financial health.
A 75-year-old giving $100,000 in cash to a qualifying charity could lock in roughly $7,000 a year for life at current suggested rates, plus a charitable deduction worth a sizable fraction of the gift. Whether that trade works for you depends on your age, your tax picture, your other income, and how much comfort you need around the money.
How the Contract Works
You transfer cash, securities, or sometimes other assets to a 501(c)(3) charity. In return, the charity contractually agrees to pay you a fixed dollar amount each year for life.1Fidelity Charitable. What Is a Charitable Gift Annuity? If you’re married, the contract can cover both of you so payments continue until the second spouse dies.2Fidelity. What Is a Charitable Gift Annuity and Is One Right for You? Whatever remains when the last annuitant dies belongs to the charity.
The transaction is part gift, part annuity purchase. You give up more than you receive back in present-value terms, and the IRS treats that excess as a charitable contribution. Most charities set a minimum donation somewhere between $5,000 and $25,000 and require the annuitant to be at least 55.
One detail separates this from a commercial annuity and deserves real weight: the payments are backed only by the charity’s general assets. There’s no separate insurance reserve and no state guaranty fund standing behind the promise.3Charles Schwab. How Charitable Gift Annuities Work If the nonprofit becomes insolvent, your income stream can disappear.
How Much You’ll Be Paid
Almost all charities that issue gift annuities use the suggested maximum rates published by the American Council on Gift Annuities (ACGA). The rates are built so that about 50% of the original gift remains for the charity after the last annuitant dies.4American Council on Gift Annuities. Current Gift Annuity Rates The older you are when you fund the annuity, the higher your rate.
Under the current ACGA schedule (effective January 1, 2024, reconfirmed through 2025), representative single-life rates are:4American Council on Gift Annuities. Current Gift Annuity Rates
- Age 65: 5.7%
- Age 75: 7.0%
- Age 80: 8.1%
- Age 85: 9.1%
- Age 90 and older: 10.1% (the cap)
On a $100,000 gift, a 75-year-old collects $7,000 a year; an 85-year-old collects $9,100. The payment is fixed. It does not move with interest rates, markets, or inflation.
Joint-and-Survivor Rates
When the annuity covers two lives, the rate drops because payments are expected to run longer. A couple both aged 65 would receive 5.0% instead of the single-life 5.7%. Both aged 80, the rate is 6.9% versus 8.1% for one person.4American Council on Gift Annuities. Current Gift Annuity Rates Couples should run both options before deciding.
Deferring the Start Date
You don’t have to start collecting right away. A deferred gift annuity lets you fund the contract now and pick a start date at least a year out. The rate goes up substantially in exchange for the wait. A 55-year-old who defers for ten years might lock in around 9%, far more than the immediate rate for that age.5Case Western Reserve University. Deferred Charitable Gift Annuity That makes deferred annuities interesting for mid-career donors who want to lock in a future income stream aimed at retirement.
The Tax Benefits
Tax treatment is where gift annuities earn their keep. You get three distinct benefits: an upfront deduction, partially tax-free income for years, and favorable handling of capital gains if you fund the annuity with appreciated property.
The Upfront Deduction
If you itemize, you deduct the “remainder interest” in the year you fund the annuity: the portion the IRS estimates will eventually reach the charity.6Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts The calculation uses the Section 7520 interest rate, which was 4.6% for April 2026.7Internal Revenue Service. Revenue Ruling 2026-7 – Rates Under Section 7520 for April 2026 Higher 7520 rates generally produce a larger deduction, because they shrink the present value of your payments and leave more attributed to the charitable remainder.
AGI limits apply. Cash gifts to a public charity are deductible up to 60% of adjusted gross income for the year. Gifts of appreciated property held more than a year are capped at 30% of AGI.8Internal Revenue Service. Publication 526 (2025) – Charitable Contributions Anything you can’t use this year carries forward for up to five more tax years.6Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc., Contributions and Gifts
Partially Tax-Free Income
Not all of your annual payment is taxable. Under Section 72, part of each payment is treated as a tax-free return of your original investment.9Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts The IRS sets this exclusion ratio when the contract starts, and it holds steady for years. Once you’ve recovered your full investment, usually right around your actuarial life expectancy, every dollar going forward becomes ordinary income. If you outlive that point, your after-tax income drops noticeably. Plan for that shift rather than being surprised by it.
Funding With Appreciated Stock
Donating long-term appreciated stock instead of cash adds another layer. Rather than selling the stock, paying tax on the full capital gain, and donating the net cash, you transfer the shares directly. The capital gain tied to your annuity portion gets spread across your actuarial life expectancy as part of each payment.10Giving To Duke. Gifts of Publicly Traded Securities The gain attributable to the charitable portion is avoided entirely. For someone sitting on a concentrated position with large embedded gains, this is one of the most tax-efficient ways to convert that stock into income.
Funding From an IRA
Since 2023, SECURE Act 2.0 allows a one-time qualified charitable distribution (QCD) from a traditional IRA to fund a charitable gift annuity.11Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts You can use the election only once in your lifetime, in a single calendar year. A spouse may make a separate election.
The rules for 2026:
- You must be at least 70½ at the time of the transfer.
- The maximum is $55,000 per taxpayer, indexed annually (up from $50,000 when the law first took effect).
- The transfer must come from a traditional IRA, not a 401(k), 403(b), or other employer plan.
- The amount is excluded from gross income, lowers AGI, and can count toward your required minimum distribution.
The QCD route is especially useful for retirees who take the standard deduction and would otherwise get no tax benefit from a charitable gift. Keeping the distribution out of income entirely delivers a deduction-like benefit without itemizing.
What Can Go Wrong
The downsides are real and deserve equal attention with the benefits.
No Guaranty Fund
Charitable gift annuities are not covered by any state guaranty fund.12NAIC State Licensing Handbook. Chapter 20 – Charitable Gift Annuities If the charity goes under, you stand in line as an unsecured creditor. Many states require issuing charities to hold reserves or meet minimum asset thresholds, but the protection varies and doesn’t promise you’ll be made whole. Several states require charities to disclose plainly that payments are not insured or guaranteed by any government agency. That disclosure is worth taking at face value.
Inflation Eats Fixed Payments
The payment you accept at 70 buys less every year after. Over a 20-year retirement, even 3% annual inflation nearly halves purchasing power. There is no cost-of-living adjustment in these contracts. If gift annuity income will be a small, supplemental piece of your retirement plan, that’s tolerable. If it’s the backbone, think hard about what those dollars will cover in 15 or 20 years.
You Can’t Undo It
Once signed, the gift is irrevocable. You can’t reclaim the principal for an emergency, change the payment terms, or redirect the money to a different cause.13National Gift Annuity Foundation. Charitable Gift Annuity Policies and Procedures Before funding one, make sure you have enough liquid reserves for medical costs, housing changes, and the usual run of surprises.
Lower Rates Than a Commercial Annuity
ACGA rates are deliberately set below what a commercial insurer would quote, because half the gift is supposed to remain with the charity. A 75-year-old taking 7.0% from a gift annuity could likely get a higher payout from a commercial immediate annuity, with state guaranty fund protection on top. The gap is the charitable component. You’re accepting less income because the gift itself matters to you.
Who It Actually Fits
Charitable gift annuities tend to work best in a handful of situations. Retirees over 70 sitting on appreciated stock can diversify out of a concentrated position, cut capital gains exposure, claim a deduction, and create predictable income in a single move. Donors who take the standard deduction but hold a traditional IRA can use the one-time QCD election to get tax-free income without itemizing. And anyone already planning to leave money to a particular charity may prefer to give during life, see the impact, and collect income along the way.
They fit poorly for younger donors who will spend decades watching inflation shrink a fixed check, for anyone who might need the principal, and for donors who are not comfortable depending on a single organization’s long-term solvency. If the charity you’re considering is small, young, or operating in a financially shaky corner of the nonprofit world, the absence of guaranty fund protection is a serious concern rather than a technicality. Stick with large, well-established institutions, and never commit money you can’t afford to lose.
How This Differs From a Charitable Remainder Trust
Donors sometimes confuse gift annuities with charitable remainder trusts (CRTs), but they’re different tools. A gift annuity is a simple contract with fixed payments backed by the charity’s general assets, workable at $5,000 to $10,000. A CRT is a separate legal trust that requires a trustee, an annual trust tax return, and setup and administrative costs that rarely make sense below roughly $100,000. A CRT can split the remainder among multiple charities and, in unitrust form, pays income that fluctuates with investment performance. A gift annuity locks in one charity and one payment amount at signing. For most donors giving under six figures who want simplicity and a check that never changes, the gift annuity is the practical choice.