topic donating mutual funds to purchase a charitable annuity in Deductions & credits

donating mutual funds to purchase a charitable annuity

jcd_3 — Mon, 17 Feb 2025 03:48:05 GMT

I have purchased a charitable annuity by donating mutual fund shares with a value of $xxx. The charity estimates it will pay out $yyy over the life of the annuity, so my charitable deduction will be $xxx - $yyy. How do I enter this in TT?

Re: donating mutual funds to purchase a charitable annuity

SabrinaD2 — Mon, 17 Feb 2025 04:31:29 GMT

To enter a charitable gift annuity funded by donating mutual fund shares in TurboTax follow these steps:

Log into TurboTax - Open or continue your return. Click on link in Step 2.
Go to donations to charitable organizations.
Select the Yes button to answer the question: Did you make any donations to charity in 2024 ?
If you have an account with ItsDeductible, select Yes to begin the process of importing your donation information; if you select No, continue to the next step.
Select Stock donations
Follow through and answer all questions related to the mutual fund (stock) donation.

Re: donating mutual funds to purchase a charitable annuity

jcd_3 — Mon, 17 Feb 2025 06:05:58 GMT

Simply filling out the prompts for stock donations is not correct. For example, if the value of the stock or mutual fund is $10,000 but the charity anticipates paying me $6000 over the course of my lifetime, I do not get credit for a $10,000 donation. Instead, the charity would then say I can claim a deduction of $4000. The prompts that TT provides does not have a way of showing what the value of the shares were and how much of that I can claim as a deduction.

Re: donating mutual funds to purchase a charitable annuity

Mike9241 — Mon, 17 Feb 2025 06:57:41 GMT

That is not the correct amount.

The amount of the deduction is calculated by subtracting the present value of the lifetime payments that will be made to the beneficiaries from the total amount of the original contribution. Present value is based on IRS actuarial tables that determine life expectancy and assumed earnings by taking into account the donation amount and the applicable gift annuity discount rate.

The charity you donated to should be able to assist you with the calculation.

from IRS website

https://www.irs.gov/retirement-plans/actuarial-tables

Re: donating mutual funds to purchase a charitable annuity

jcd_3 — Mon, 17 Feb 2025 17:58:22 GMT

Yes it is the correct amount and it is, in fact, just what you describe. I give the charity a certain amount of money, they subtract what they expect to pay back using actuarial tables and the annuity payments , and the difference is my deductible amount. My question is how do I enter these numbers into TT. TT does not seem to have an option to describe these calculations.

Re: donating mutual funds to purchase a charitable annuity

IsabellaG — Sun, 23 Feb 2025 22:08:16 GMT

To enter this donation in TurboTax:

If you're using TurboTax Desktop,

Go to Federal Taxes, and select Deductions and Credits
Select Donations to Charity in 2024
Say yes, you want to enter your donations.
On Let's enter your donations one at a time, select ITEMS.
On How Do You Want to Value Your Donations? Choose I'll value them.
On Choose a category for this donation, choose Securities (not stock).
On Tell us about the items, enter Gift Annuity and the value.
On Method Used to Determine Value, choose Present Value.
Continue through the section, entering the information about purchase price and date acquired, and that the donation will be used in direct association with the charity's function.

Re: donating mutual funds to purchase a charitable annuity

jcd_3 — Mon, 24 Feb 2025 05:08:22 GMT

This last answer is closer to what is needed but is still not sufficient. First, if I enter the gift as a security then the donation does not populate form 8283, which it should. If I enter it as a publicly traded stock (and it is publicly traded, like a stock), then the donation does appear in form 8283. In neither case, however, is there then a way to explain how the deduction that I am claiming was determined (i.e., value of the mutual funds - anticipated value of benefits to be paid to me = charitable deduction that I can claim. Form 8283 says "If you need more space, attach a document.) I think that is what I will do because I can then explain how I arrived at the numbers I've entered into the TT form. which then appear in form 8283.

Re: donating mutual funds to purchase a charitable annuity

billdickason — Wed, 05 Mar 2025 21:33:19 GMT

This is crazy. People have posting about this on the forum since at least 2020.

Nothing posted has been a solution, and TT experts are striking out.

I have jerry-rigged the input and will include with the return, the letter from the charity that shows why I did what I did. You have to send this in anyway for large amounts, if you are e-filing .

My Charity shows the cost of what I actually gave, what they deducted to fund the annuity, and the resulting contribution to the charity.

$291,232 - $116,050 = $175,182 (letter from charity)

The share price donated was $88.66 and involved 3,284.82sh ( the $291,232)

The 175,182 represents 1975.88 sh (175182/88.66)

The price of the stock when purchased was $48.70/sh which you figure out from your records

The actual donation of $175,182 represents original cost $96,225 (1975.88 x $48.70)

There you have it. Enter it with the stock symbol for the stock or mutual fund.

Explain what you did in the letter.

Presumably if you are limited as to what you can deduct, TT will keep track of what you are carrying over.