Funding a charitable gift annuity from an IRA turns a required withdrawal into a lifetime income stream for a cause you care about. The money leaves the IRA without ever landing on your tax return, the charity issues you an annuity, and the withdrawal you were forced to take anyway does double duty.
The rules around it are narrow, and the window is genuinely once in a lifetime. Below is what the 2026 numbers are, how the payments get taxed, and the households this actually fits.
What a Gift Annuity Funded From an IRA Actually Is
It is a one-time election created by the 2022 retirement law, often called the Legacy IRA provision. You instruct your custodian to send money straight from your IRA to a charity, and the charity issues a contract promising fixed payments to you for life.
Three pieces make it work:
- The distribution qualifies as a qualified charitable distribution, so it stays out of your adjusted gross income.
- It counts toward your required minimum distribution dollar for dollar.
- The charity issues an annuity in return, which is what separates this from an ordinary gift.
The election is available in one tax year during your life. Use $20,000 of it and the remaining $35,000 disappears. There is no carryforward and no second try.
The 2026 Numbers
- $55,000 is the one-time limit for funding a gift annuity or charitable remainder trust this way.
- $111,000 is the annual qualified charitable distribution limit per person, and the $55,000 counts inside that number rather than on top of it.
- Spouses each have their own election. Two IRA owners who both qualify can each use $55,000, though they cannot combine them into a single contract.
So a couple in 2026 could fund a gift annuity with $55,000, then send another $56,000 in ordinary gifts from the same IRA and stay within the annual cap. Both limits are indexed, so they move each year.
Who Qualifies and Who Can Receive the Payments
You must have actually reached 70½ on the date of the distribution. Turning 70 that year is not enough, and the half matters.
The annuitants can only be you, your spouse, or both. Children and grandchildren cannot receive these payments, which is the single biggest difference from a gift annuity funded with cash or stock.
The contract also has to pay at least 5% annually. Rates published by the American Council on Gift Annuities generally clear that for someone 70½ or older, though a younger spouse named as a joint annuitant can pull the rate below the line. Worth checking before anything gets signed.
How the Payments Are Taxed
Every dollar that comes back to you counts as ordinary income. There is no tax-free portion and no capital gain treatment.
That surprises people who have read about gift annuities generally, because a gift annuity funded with cash or appreciated stock usually returns part of each payment tax-free as a return of principal. Our guide to how gift annuity rates work covers that version.
You also get no charitable deduction for the transfer. That sounds worse than it is. The money left a pre-tax IRA without ever being taxed, which is a benefit you cannot get with a deduction, and most retirees who take the standard deduction would not have used one anyway.
Here is the shape of it. A $55,000 gift at a 7% rate produces $3,850 a year for life, all of it ordinary income, with the $55,000 satisfying that much of your required minimum distribution and staying out of your adjusted gross income entirely. Ask the charity for its current rate at your age rather than assuming any particular number.
Why Keeping It Out of Your Income Matters
Adjusted gross income drives more than your tax bracket. It feeds the calculation that determines how much of your Social Security is taxable and sets your Medicare premiums two years out, as our guide to Medicare premiums based on income explains.
Required distributions begin at 73, or 75 if you were born in 1960 or later, while this election opens at 70½. That gap gives some households a few years to move money out of a traditional IRA before the forced withdrawals start, alongside the other lever covered in our guide to Roth conversion before RMDs.
Where It Fits, and Where It Does Not
It fits when you already give to a charity you trust, you have a traditional IRA large enough that distributions push your income higher than you want, and fixed lifetime income appeals to you more than a lump sum gift.
It does not fit when:
- You want your children to receive the payments. Only you and your spouse qualify.
- You want the money back. The transfer is irrevocable and the income interest cannot be assigned.
- You want a deduction this year. There is none.
- You are considering a charitable remainder trust instead. Legal and administrative costs rarely make sense on $55,000, which is why nearly all of these elections fund gift annuities.
- You want payments to start later. Deferred gift annuities are not permitted here, though payments can begin a year out.
What to Check Before You Sign
- The charity’s ability to pay for decades. A gift annuity is backed by the organization’s own assets, so its financial strength is what stands behind your payments.
- The rate at your age. Rates differ between charities, and the published schedule is a recommendation rather than a rule.
- The transfer route. Money must move directly from the custodian to the charity. A distribution to you first disqualifies the whole thing.
- The paperwork the custodian needs. The charity’s legal name, tax ID, and address, before any year-end deadline.
- The calendar. The gift date is the date the money leaves your account, and there are no extensions past December 31.
Frequently Asked Questions
Can My Spouse and I Each Use the Election
Yes, if you each own an IRA and each have reached 70½. Each election funds its own contract, since two donors cannot combine a single one.
What If I Do Not Use the Whole $55,000
Whatever is left goes unused. The election covers one tax year, and the unused portion does not carry into the next.
Can I Add More Money to the Same Gift Annuity Later
No. Other assets cannot be combined with this contract. A later gift would have to establish a separate annuity.
Can I Split the $55,000 Between Charities
Yes, across one or more gifts to one or more charities, as long as all of it happens in the same tax year.
Does It Count Toward My Required Minimum Distribution
Yes, dollar for dollar, the same as any qualified charitable distribution.
How We Coordinate Charitable Gifts at Global Investment Strategies®
We have worked with Tucson families since 2009. A one-time election deserves more than a brochure from the charity that benefits from it.
Our work is running the numbers against your actual distribution schedule, weighing this against ordinary qualified charitable distributions and the Arizona charitable tax credit, and making sure the contract terms and the charity behind them hold up. Your CPA handles the reporting. We make sure the decision fits the rest of your income plan before you use the one election you get.
Turn a Required Withdrawal Into Something You Choose
The money is coming out of the IRA either way once distributions begin. This decides whether it lands on your tax return or goes somewhere you intended.
We work with families across Tucson, Oro Valley, Marana, and the Catalina Foothills. Request a private conversation and we will look at whether this election fits your distribution plan, alongside your CPA.
Global Investment Strategies® provides educational planning concepts and works alongside your qualified legal, tax, and financial professionals. This article is educational and is not individualized tax, legal, or financial advice. Payments under a charitable gift annuity are backed by the issuing charity’s assets. Contribution limits and rules reflect federal law as of September 2026 and change over time.
