Did you recently make a nice profit on a stock or
real estate sale? How do you plan to replace the income that those investments
had generated? Plus you can’t forget about the tax bite that you’re facing. A
charitable gift annuity (CGA) might possibly solve these problems, and at the
same time let you help your favorite charity.
A CGA is a direct contract with a charity. The donor
makes the gift, and the nonprofit agrees to provide an income based on the life
expectancy of one or two people. Gifts would become part of the organization’s
assets and the promise of future payments part of the charity’s liabilities.
The cash that you put into a CGA will earn you an
income tax deduction of up to 50% of your adjusted gross income. This can help
offset the gain that you realized from your investment sale. Another tax benefit
with a CGA is that part of each distribution is considered a tax-free return of
principal.
The amount of the payments is based on the size of
the initial investment, the age of the beneficiaries, and the prevailing
interest rates. For example, if you are single, 70 years old, and invest $10,000
in a CGA, you might possibly receive a $720 annual income for
the rest of your life and a one-time $3,660 tax deduction. Per AARP Bulletin, most charities use
standardized tables for payouts depending on age of annuitant.
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