IRC Section 7520 Interest Rates: Monthly Values and Trust Uses

The Section 7520 interest rate is the monthly discount rate the IRS requires for valuing annuities, life estates, remainder interests, and reversionary interests when calculating federal gift and estate tax. For April 2026, the rate is 4.6%.¹ Because the rate resets every month and can swing by two-tenths of a percent or more, the month you use often changes the tax result.

2026 Rates by Month

The IRS has published the following Section 7520 rates for 2026 so far:¹

January 2026: 4.6% (120% figure: 4.57%)
February 2026: 4.6% (120% figure: 4.63%)
March 2026: 4.8% (120% figure: 4.72%)
April 2026: 4.6% (120% figure: 4.59%)

For context, the rate sat near 0.4% to 1.0% during 2020 and 2021. The mid-4% range that has held through early 2026 reflects a very different planning environment.

How the Rate Is Set

The formula is fixed. Take the applicable federal mid-term rate for the month, multiply by 120%, and round to the nearest two-tenths of one percent.¹ The mid-term rate is the average market yield on U.S. Treasury obligations with remaining maturities between three and nine years, determined by the Secretary of the Treasury each month for use in the following month.² For Section 7520 purposes, the mid-term rate is compounded annually.

The rounding is not cosmetic. A calculated 4.57% rounds down to 4.6%, but 4.72% rounds up to 4.8%. On a large trust, that two-tenths shift can move the value of a remainder interest by tens of thousands of dollars.³

What the Rate Values

Section 7520 applies whenever you need the present value of a future interest for federal transfer tax purposes. The statute covers annuities, interests for life or a term of years, and remainder or reversionary interests.³

An annuity is the right to receive fixed payments over a period or a lifetime. A life estate is the right to use property for as long as someone lives. A term-of-years interest gives that same right for a fixed duration. A remainder is what’s left when those prior interests end, and a reversionary interest is a remainder that returns to the original owner or their estate.⁴ In practice, the vehicles that most often require a 7520 valuation are Grantor Retained Annuity Trusts (GRATs), Qualified Personal Residence Trusts (QPRTs), Charitable Remainder Trusts (CRTs), and Charitable Lead Annuity Trusts (CLATs).

The Mortality Component

The rate is only half the calculation. The other half is a set of actuarial tables the IRS prescribes to reflect life expectancy. When an interest depends on someone’s lifespan, you need both a discount rate and a mortality assumption to arrive at present value.

The current tables, designated Table 2010CM, are based on mortality data from around 2010 and took effect on June 1, 2023. They apply to all valuations dated on or after that date. The statute requires the IRS to revise these tables at least once every ten years.⁵

One rule catches people off guard: for every interest in the same property transferred on the same date, you must use the same mortality basis. You cannot use one set of assumptions for the annuity interest and a different set for the remainder in the same trust.⁵

When the Tables Cannot Be Used

The standard tables assume ordinary mortality. When that assumption breaks, the regulations carve out exceptions.

Terminal Illness

If the individual whose life measures the interest is terminally ill at the time of transfer, the standard mortality tables do not apply. The regulation defines terminally ill as having an incurable illness or deteriorating physical condition with at least a 50% probability of death within one year. There is a safe harbor: if the person survives eighteen months or longer after the valuation date, they are presumed not to have been terminally ill, and the IRS can rebut that presumption only with clear and convincing evidence. The tables also cannot be used when the decedent and the measuring life die in a common accident.⁶

Restricted Beneficial Interests

The regulations also allow departure from the tables when contingencies, powers, or other restrictions on an interest make the standard calculation produce unrealistic results. A taxpayer who wants to deviate bears the burden of proving that the standard valuation is unrealistic and unreasonable.⁷

Retirement Plans and Annuity Contracts

Section 7520 does not apply to the income tax treatment of qualified retirement plans under Sections 401 and following, or to the income taxation of life insurance and annuity contracts under Section 72. The estate and gift tax treatment of those same arrangements does use Section 7520 where applicable.⁷

High Rate or Low Rate: Which You Want Depends on the Trust

The 7520 rate drives the economics of most split-interest transfers, and the direction you want the rate to run depends entirely on the vehicle.

GRATs: Lower Is Better

A grantor retains annuity payments for a term of years, and the remainder passes to beneficiaries. The taxable gift is the remainder, which equals the total transfer minus the present value of the retained annuity. A lower 7520 rate makes the retained annuity worth more and shrinks the taxable remainder. Practitioners often design “zeroed-out” GRATs where the annuity payments are calibrated so the remainder equals approximately zero. At mid-4% rates, GRATs are less efficient than they were at sub-1% rates, but the structure still works if the trust’s investments outperform that hurdle.³

QPRTs: Higher Is Better

The grantor transfers a home into the trust and retains the right to live in it for a term of years. The taxable gift is the remainder. A higher 7520 rate increases the present value of the retained term interest and shrinks the remainder, reducing the gift tax value. Current rates produce meaningfully smaller taxable gifts than QPRTs generated when rates sat near zero.

Charitable Remainder Trusts: Higher Is Better

When you fund a CRAT or CRUT, your charitable income tax deduction equals the present value of the remainder going to charity. A higher 7520 rate reduces the present value of the annuity interest you keep and increases the projected charitable remainder, which raises your deduction. The effect is stronger for CRATs; CRUTs are less sensitive because the unitrust payout adjusts with trust value.¹ A related constraint: for a CRT to qualify, the remainder must be worth at least 10% of the initial trust value using the 7520 rate. When rates were very low, some CRAT designs failed this test.

CLATs: Lower Is Better

Charity receives the annuity payments during the trust term, and non-charitable beneficiaries take the remainder. The taxable gift is that remainder. A lower 7520 rate makes the charitable lead worth more and shrinks the taxable remainder. Wealth-transfer CLATs perform best when rates are low.

The Prior-Month Election for Charitable Transfers

If a transfer involves a charitable contribution deduction, you get a choice: use the 7520 rate for the month of the transfer, or elect the rate from either of the two preceding months. This three-month window exists only when an income, estate, or gift tax charitable deduction is allowable for any part of the property.³ Non-charitable transfers get no such flexibility and must use the rate for the month the valuation date falls in.

For CRTs, you generally want the highest rate available in the window. For CLTs, the lowest. To make the election, the executor or taxpayer attaches a statement to the return identifying the chosen month. For estate tax returns, the statement must include the elected month, a description of the transferred interest with a copy of the governing instrument, the names and birthdates of measuring lives, a note of any terminal illness condition, and a computation showing how the deduction was calculated using the elected rate.⁸

Once elected on a timely filed return (including extensions), the choice is generally irrevocable. The elected rate must apply consistently to every interest in the same transfer. You cannot mix months across the annuity and the remainder in the same trust.

Where to Check the Current Rate

The IRS publishes each month’s Section 7520 rate through a Revenue Ruling that appears in the Internal Revenue Bulletin. The rate for the coming month is typically first published around the 20th of the preceding month. May’s rate, for example, normally appears around April 20.⁹

The most convenient reference is the IRS’s dedicated Section 7520 page, which maintains a table of rates by month and year with the corresponding Revenue Ruling numbers.¹ Check the rate before finalizing any transaction date. For charitable transfers that qualify for the prior-month election, comparing all three available months before executing the gift is standard practice.

1
Internal Revenue Service. Section 7520 Interest Rates
2
Office of the Law Revision Counsel. 26 USC 1274 – Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property
3
Office of the Law Revision Counsel. 26 USC 7520 – Valuation Tables
4
eCFR. 26 CFR 20.7520-1 – Valuation of Annuities, Unitrust Interests, Interests for Life or Terms of Years, and Remainder or Reversionary Interests
5
Internal Revenue Service. Actuarial Tables
6
eCFR. 26 CFR 20.7520-3 – Limitation on the Application of Section 7520
7
eCFR. 26 CFR 25.7520-3 – Limitation on the Application of Section 7520
8
eCFR. 26 CFR 20.7520-2 – Valuation of Charitable Interests
9
Internal Revenue Service. Applicable Federal Rates