Some people want to give their home to charity yet reserve a right to live there as long as they live. Going a step further, suppose that such a donor desires an income stream and the charity is willing to provide that income.


If so, the charity can treat the transaction as a charitable gift annuity. The annuity, in turn, will be based upon the present value of the future donation.


Generally, charitable gift annuity rates will be less than commercial annuity rates. If an insurance company would pay $11,000 per year, for example, for a $150,000 immediate annuity, a charity might pay $8,000 per year for a gift annuity to the same person.


The difference between the commercial annuity rate and the charitable gift annuity rate will determine the amount of the income tax deduction for a charitable contribution. Instead of a $150,000 deduction, if the donation had been made without the annuity, the donor might receive a $40,000 deduction.