A Deferred Gift Annuity works the same way as a charitable gift annuity except the first annuity payment is deferred for at least one year from the date of the gift. In addition, you obtain a generous charitable income tax deduction in the year the gift is made.
This is an excellent way for younger donors to make a gift and receive a charitable income tax deduction while providing income for the future.
Benefits of a Deferred Gift Annuity
- This is an excellent method of arranging dependable retirement income.
- By deferring the date on which annuity payments begin you will receive a larger income tax charitable deduction in the year of the gift.
- You ensure the future of the rheumatology profession.
Example of a Deferred Gift Annuity
Mr. Smith, age 55, makes a cash gift this year of $100,000 to the REF in return for the Foundation’s agreement to pay $9,700 to him annually beginning when he retires at 65. Mr. Smith’s current income tax deduction will be roughly $39,100 (based on an IRS discount rate of 4.6 percent). Because he is in the 35 percent income tax bracket, his current tax savings will be about $13,700. When he begins to receive the annuity, $3,065 of his annuity payments will be tax-free income for almost 20 years after the payments begin, effectively giving Mr. Smith a rate of return equivalent to a 10.77 percent taxable return.
