Also known as the AFR or Applicable Federal Rate, the IRS discount rate is used in determining the charitable deduction for many types of planned gifts, such as charitable remainder trusts and gift annuities. The rate is the IRS's assumption of the annual rate of return that the gift assets will enjoy during the gift term.
The IRS discount rate is published monthly. It equals 120% of the annual mid-term rate, rounded to the nearest 0.2%. The annual mid-term rate is the annualized average yield of treasury instruments over the past 30 days that have remaining maturities of 3-9 years.
The higher the IRS discount rate, the higher the deduction for charitable remainder trusts and gift annuities, and the lower the deduction for charitable lead trusts and retained life estates. Fluctuations in the IRS discount rate affect unitrust deductions far less than annuity trust and gift annuity deductions. IRS discount rate fluctuations do not affect pooled income fund deductions at all.
Visit the PG Calc web site at www.pgcalc.com for information on the latest IRS discount rates.
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