Downward Pressure on Deductions: IRS Discount Rate Hits All-Time Low

October’s IRS Discount Rate of 1.4% will be the lowest rate ever, putting further downward pressure on charitable deductions for gift annuity and charitable remainder annuity trust gifts. At 1.4%, an annuitant must be at least 59 for a gift annuity to be able to pay the American Council on Gift Annuities (ACGA) suggested maximum rate.

Two annuitants must both be at least 66. For deferred annuities, a 55 year-old annuitant who defers payments until 65 will need to accept a rate below the ACGA rate. In contrast, a 60 year-old who defers payments until 65 or 70 will still be able to get the ACGA rate. Of course, donors will still be able to use August’s 2.2% for October gifts and September’s 2.0% for November gifts, so these minimum age thresholds will remain a little higher than the ones quoted above for at least the next two months.

What’s more, it is worth remembering that an all-time low IRS discount rate also translates to all-time high deductions for retained life estates and charitable lead annuity trusts.