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Consider a charitable gift annuity this holiday. It's a gift that also pays you income.

This holiday, consider making a gift that keeps on giving ... to you.

It’s well-known that charitable contributions made before year-end can provide a tax deduction. But a charitable gift annuity (CGA) can be set up to offer some tax benefit and a lifetime annual income.

A CGA is basically a contract between you and a qualified nonprofit that allows you to donate cash, assets or securities. In return, you receive a partial tax deduction and a fixed income stream for the rest of your life. When you die, the remaining annuity stays with the charity.

Amid two years of inflation and growing concerns Social Security will run out of money, retirees might be looking to secure reliable income for those golden days. A CGA could help, experts say.


“It can be a really good option if you want to support charity but want to retain cash flow,” said Greg Olsen, partner at wealth management firm Lenox Advisors.

How does a charitable gift annuity work?

You donate money, securities or assets to a nonprofit organization that offers charitable gift annuities. The charity invests part or all your donation. Based on your age at the time of the gift, you receive a fixed monthly or quarterly payout (typically supported by the investment account) for the rest of your life.

Younger people may receive more payments over their lifetime, but they’ll likely be smaller than those for older adults who receive larger but fewer overall payments. Whatever remains of the gift at your death goes to the charity.

If you donate jointly with a spouse and you pass away, your spouse may continue to receive income until their death.

Donations may be as little as $5,000 but usually run much higher.

Is a charitable gift annuity tax deductible?

If you itemize your taxes, instead of taking the standard deduction, you may be eligible for a partial tax deduction in the calendar year you gave the gift. If you want to claim a deduction for 2023, the CGA must be set up by Dec. 31. Fortunately, it's inexpensive to do and can be done in about a week or two, said Olsen. Contact the charity you're interested in and they can walk you through it.

The deduction is based on the estimated amount that will eventually go to the charity after all the annuity payments are made.

How is income from a charitable gift annuity taxed?

Part of your annual fixed payments may be tax free for a period of time, Olsen said. The portion that’s taxed will be considered ordinary income and taxed at your federal and state income tax rate.

Can an IRA fund a charitable gift annuity?

Yes. If you are 70½ years and older, you can make a one-time election of up to $50,000 to fund a gift annuity from your individual retirement account, or IRA. You won’t get a tax deduction for the donation, but it counts toward your required minimum distribution (RMD) and is transferred to the charity tax free.

Straight RMDs are usually taxed as income unless they're from Roth accounts, which have tax-free distributions.

Before 2023, money moved into a CGA would have been subject to income tax and not counted toward your RMD.

Are there disadvantages to a charity gift annuity?

Some of the things you need to consider before jumping in, Olsen said, are:

  • Payments may be lower than what you might get if you invested the money or allowed the asset to continue appreciating.

For example, the average CGA return for a 60-year-old male is 4.5%, meaning he’d receive $4,500 annually for a $100,000 gift. If that man passes away, the remainder of the money stays with the charity. That contrasts with a straight annuity, that might get him 6.6%, or $6,600 a year, and if he dies, his beneficiaries will receive the payments.

  • Payments are fixed, or not inflation adjusted.

  • You can’t support multiple charities. The contract is only with one nonprofit.

  • Your payments depend on the solvency of the charity so choose wisely. “If the charity goes belly up, your payments end,” Olsen said.

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Is a charitable gift annuity a good idea?

It depends on what your goals are, Olsen said.

There are also other ways to give that offer different benefits. For example, a regular charitable contribution gives you all the tax benefits upfront, or a donor advised fund (DAF) allows you to take the tax benefit immediately and donate to various charities over time.

People should weigh all their options and consult with a financial adviser and a tax attorney if they want to give to charity, he said.

However, “if you’re not charitably inclined, then don’t do it,” he said. If you’re looking for lifetime guaranteed income, “just do a regular annuity” through an insurance company.

Though you can’t give an insurance company assets or securities for that cash flow, you’ll get a higher return for your money and have more flexibility to pass on payments to beneficiaries after your death.

Another thing to consider is your health and age.

“If you’re young and healthy, something like this may make sense,” he said, because you can collect every year for a long time. “But if you expect a short life, it doesn’t make sense.”

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.

This article originally appeared on USA TODAY: Charitable gift annuity helps nonprofits and pays you lifetime income