IRS Actuarial Tables for Annuity Valuation: Table S & Pub 939

Two different IRS publications hold the actuarial tables that touch annuities, and they answer different questions. For federal transfer taxes (gift and estate), IRS actuarial tables for annuity valuation live in Publication 1457, and Table S is the one that converts a life annuity into a present-value dollar figure using the Section 7520 interest rate. For income tax on annuity payments you are receiving, Publication 939 provides Tables V and VI, which tell you what portion of each check is a tax-free return of what you paid in. Same word, “annuity,” different tables, different math.

Which Table Does Which Job

Table S in Publication 1457 handles transfer tax valuations: gifts, bequests, charitable remainder trusts, charitable lead trusts, retained life estates. Each sub-table within Table S corresponds to a specific Section 7520 interest rate and lists factors by age. You look up the age of the person whose life measures the interest, find the column for the interest type (annuity, life estate, or remainder), and pull the factor. Those factors feed Form 706 (estate tax) and Form 709 (gift tax).

Publication 1457 also contains supporting tables for situations Table S alone doesn’t cover:¹

Table R(2), two-life remainder factors, for interests measured by two lives rather than one.
Table B, term-certain factors, for interests that last a fixed number of years rather than a lifetime.
Tables J and K, adjustment factors for payments made at the beginning of each period (J) or the end (K), and for payment frequencies more often than annual.

Publication 939 sits on the income tax side. When you receive pension or annuity payments, part of each check is a tax-free return of the money you originally paid in and the rest is taxable income. Publication 939 tells you how to compute that split under the General Rule. Table V handles single-life annuities; Table VI handles joint-and-survivor annuities. Both use life expectancy multiples based on age alone, with no interest rate input.²

The underlying mortality data behind all of these tables is Table 2010CM, drawn from around 2010 census mortality experience. It applies to any valuation dated June 1, 2023, or later, and there is no election to use the older tables for valuations after that date.¹

When Publication 939 Actually Applies to You

Most people receiving retirement income never open Publication 939. Distributions from qualified employee plans, qualified employee annuities, and tax-sheltered annuity contracts fall under the Simplified Method, which uses a basic worksheet in the Form 1040 instructions or Publication 575 instead of the actuarial tables.³

Publication 939 and Table V or VI come into play when the annuity is from a nonqualified source, such as a privately purchased commercial annuity that doesn’t qualify for the Simplified Method. In that case you divide your investment in the contract by the expected return (annual payment times the Table V or VI multiple) to get an exclusion percentage, and that percentage sets how much of each payment escapes tax. Once you’ve recovered your full investment, every dollar of every later payment is fully taxable.²

Inputs You Need Before Opening Table S

The Section 7520 Interest Rate

For any Table S calculation, the Section 7520 rate is the biggest lever. It equals 120 percent of the federal midterm rate for the month of the valuation, rounded to the nearest two-tenths of one percent, and the IRS publishes it monthly in a Revenue Ruling in the Internal Revenue Bulletin.⁴ For April 2026, the rate is 4.6 percent.⁵

If the transfer qualifies for an estate or gift tax charitable deduction, you can elect to use the Section 7520 rate from either of the two months preceding the transfer month instead of the transfer month itself.⁴ The two-month lookback exists only for charitable transfers and lets you pick whichever of the three months gives the best result. To elect, the executor or donor attaches a statement to the return identifying the chosen month. The election can be revoked within 24 months of the later of the filing date or the due date, and if you elect a prior month’s rate you must use that month’s mortality component for every interest in the same property.⁶

Age at Nearest Birthday

Table S uses age at nearest birthday, not last birthday. Someone who is 70 years and 7 months old rounds up to 71.⁷ One year off pulls a different factor, and on a large estate that shifts the reported value by real money.

Payment Frequency and Timing

Annuity payments can be annual, semi-annual, quarterly, or monthly, and they can arrive at the start or the end of each period. Both details drive which adjustment factor you take from Table J or Table K. A monthly annuity paid at the beginning of each month is worth more than an annual payment at year-end, because the money arrives sooner and more often. Skip this adjustment and the reported present value is wrong.

Running the Numbers

Transfer Tax Present Value with Table S

Once you have the right factor, the core math is one multiplication. For a remainder interest, multiply the property’s fair market value by the remainder factor. For an annuity interest, multiply the annual payment by the annuity factor. The result is the present value reported on Form 706 or Form 709. If payments occur more often than annually or start at the beginning of each period, apply the appropriate Table J or Table K adjustment before multiplying.⁷

Income Tax Exclusion Ratio with Publication 939

The Publication 939 math splits payments rather than valuing them.² You need three numbers:

Investment in the contract, meaning the total you paid in, adjusted for any refund feature or death benefit exclusion.
Expected return, which is the annual payment multiplied by the life expectancy multiple from Table V (single life) or Table VI (joint lives).
Exclusion percentage, which is investment divided by expected return, rounded to three decimal places.

Multiply each payment by the exclusion percentage to find the tax-free portion. That tax-free dollar amount stays constant even if cost-of-living adjustments raise the total payment later. For annuities with a starting date after 1986, total excluded amounts over the life of the annuity cannot exceed your net cost, so once you’ve recovered your investment, later payments are fully taxable.²

When the Standard Tables Can’t Be Used

The tables assume a healthy person with a normal life expectancy. Two categories of situation break that assumption.

Terminal Illness

If the person whose life measures the interest is terminally ill at the time of transfer, the mortality component of the Section 7520 tables cannot be used. The IRS defines terminally ill as having at least a 50 percent probability of death within one year from an incurable illness or deteriorating physical condition. There is a safe harbor: if the individual survives 18 months or longer after the transaction date, they are presumed not to have been terminally ill unless clear and convincing evidence proves otherwise.⁸

Restricted Beneficial Interests

Standard factors also can’t be used when contingencies, powers, or restrictions make actual enjoyment uncertain. The regulations flag several patterns:⁸

Annuities payable from a fund likely to be exhausted before the payments end, based on the applicable Section 7520 rate.
Income interests where the governing instrument allows the beneficiary’s income to be withheld, accumulated, or redirected without the beneficiary’s consent.
Remainder interests where the trust terms don’t adequately preserve the property for the remainder beneficiary.

When standard factors are off the table, valuation usually requires an independent appraisal or an actuarial analysis tailored to the restrictions. The IRS will not accept a Table S factor applied to an interest that plainly doesn’t fit the table’s assumptions.

What a Bad Valuation Costs

Section 6662 imposes a 20 percent penalty on any underpayment resulting from a substantial estate or gift tax valuation understatement. An understatement is substantial when the value claimed on the return is 65 percent or less of the correct value and the resulting underpayment exceeds $5,000. The penalty doubles to 40 percent for a gross valuation misstatement, defined as claiming a value that is 40 percent or less of the correct amount.⁹ On a multimillion-dollar estate, that 40 percent penalty stacked on the additional tax owed is a significant number. Pulling the correct factor, from the right table, at the right interest rate, for the right age, is the difference between a defensible return and one that draws an audit.

1
Internal Revenue Service. Actuarial Tables
2
Internal Revenue Service. Publication 939, General Rule for Pensions and Annuities
3
Internal Revenue Service. Topic No. 411, Pensions – The General Rule and the Simplified Method
4
Office of the Law Revision Counsel. 26 USC 7520 – Valuation Tables
5
Internal Revenue Service. Rev. Rul. 2026-7
6
eCFR. 26 CFR 20.7520-2 – Valuation of Charitable Interests
7
Internal Revenue Service. Treasury Decision 8819 – Use of Actuarial Tables in Valuing Annuities, Interests for Life or Terms of Years, and Remainder or Reversionary Interests
8
eCFR. 26 CFR 1.7520-3 – Limitation on the Application of Section 7520
9
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments