PG Calc Blog

After six years of drifting around in record-low territory, the Applicable Federal Rate, otherwise known as the IRS discount rate, has leaped upward 0.6% this month to 2.4%. That’s the highest the rate has been since mid-2014.  The leap was a direct consequence of the Federal Reserve raising its target for the Fed Funds rate in mid-December. What’s more, the Fed has indicated it expects to raise the Fed Funds rate in increments three more times during 2017. That would portend further increases in the IRS discount rate over the next 12 months.

The trend of the ultra-low IRS discount rate introduces some risk to charitable gifts – specifically, it increases the likelihood that some gifts won’t pass tests that have been deemed important. Additionally, the current 1.0% rate could pose a particular problem if it persists after September 30 and the 1.2% look back is no longer available. 

In the realm of gift planning, there are a number of terms that we use often. For those new to gift planning or those looking for a refresher, this is the first in a series of articles entitled: “5 Terms Every Gift Planner Should Know.”  

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.