How to Calculate a Charitable Remainder Trust Tax Deduction

To calculate a charitable remainder trust tax deduction, you take the fair market value of what you contributed to the trust and subtract the present value of the income payments the trust will make to you or your non-charitable beneficiaries. What’s left is the present value of the charity’s remainder interest, and that figure is your income tax deduction. Three variables move the number: the payout rate you pick, how long the trust will pay income, and the Section 7520 interest rate the IRS publishes each month.¹ The type of CRT you use decides which formula applies to the numbers.

Start With Which Type of CRT You’re Funding

The calculation splits into two paths depending on the trust structure.

A charitable remainder annuity trust (CRAT) pays a fixed dollar amount every year, set when you fund it. Fund a CRAT with $1 million at a 6% payout and you receive $60,000 annually for the trust’s entire term, regardless of investment performance. Additional contributions aren’t permitted after the initial funding.²

A charitable remainder unitrust (CRUT) pays a fixed percentage of the trust’s value, revalued each year. That same $1 million at 6% pays $60,000 in year one, $66,000 if the trust grows to $1.1 million, $54,000 if it drops to $900,000. A CRUT accepts additional contributions and gives payments a built-in inflation hedge.²

Both types must pay out at least 5% and no more than 50% each year, and both must project a remainder to charity worth at least 10% of what you contributed. A trust that violates those limits isn’t a CRT at all, and no charitable deduction is available.³

The Three Inputs That Move the Number

Payout Rate

The payout rate is the percentage (CRUT) or fixed dollar amount (CRAT) leaving the trust each year. A lower payout leaves more assets projected for the charity, which raises your deduction. Pushing the rate higher shrinks the projected remainder and shrinks the deduction with it. Donors focused on the upfront deduction typically stay near the 5% floor. Donors who need current income accept a smaller deduction to get it.

Trust Term

Payments can run for a set number of years, up to 20, or for the lifetime of one or more people living when the trust is created.² Shorter terms mean the charity gets its money sooner, which means a larger present value for the remainder and a larger deduction. For lifetime trusts, the IRS uses actuarial life expectancy tables to estimate the payment period, so a younger beneficiary produces a smaller deduction than an older one on the same contribution. The gap between a 45-year-old and a 70-year-old beneficiary can swing the deduction by tens of thousands of dollars.

Section 7520 Rate

The Section 7520 rate is the IRS discount rate used to convert future dollars into present value. It equals 120% of the federal mid-term rate, rounded to the nearest two-tenths of a percent, and the IRS resets it monthly. For early 2026 it has run between 4.6% and 4.8%.¹

The rate’s effect on the deduction is not intuitive and depends on the trust type. For CRATs, a lower Section 7520 rate generally increases the deduction because of how the annuity’s present value is calculated. For CRUTs, a lower rate typically produces a larger deduction because the adjusted payout rate factor compounds differently against the discount rate. The interaction is complicated enough that practitioners routinely run the numbers at multiple rates before funding.

You aren’t stuck with the rate from the month you fund. The law lets you elect the rate from either of the two preceding months instead.⁴ That three-month window lets you shop for the most favorable rate available.

How the Math Actually Gets Done

CRAT Calculation

For a CRAT, the IRS subtracts the present value of the annuity from the fair market value of the contributed assets. If the trust pays for a term of years, you use a standard present-value-of-annuity formula at the Section 7520 rate. If the trust pays for someone’s lifetime, you use the annuity factors in IRS Publication 1457 or the single-life remainder factors the IRS publishes alongside the 7520 rate.

A simple illustration: fund a CRAT with $500,000, a 5% payout ($25,000 per year), and a 15-year term at a 4.6% Section 7520 rate. You compute the present value of $25,000 per year for 15 years discounted at 4.6%, then subtract that from $500,000. What remains is the deduction. In a setup like this, the deduction generally lands somewhere in the 35% to 40% range of the contributed amount, though the exact figure depends on the payment frequency adjustment and the actuarial factor pulled from the tables.

CRUT Calculation

The CRUT math is more involved because the annual payment moves with the trust’s value. Rather than discount a fixed stream, the IRS uses an “adjusted payout rate” that combines the unitrust percentage with the payment frequency (monthly, quarterly, or annually). That adjusted rate is then applied to remainder factors from IRS tables: Table D for a term-of-years CRUT, or Table S (keyed to the beneficiary’s age and the Section 7520 rate) for a life CRUT.⁵

For a term-of-years CRUT the core formula is: Deduction = Fair Market Value × Remainder Factor. The remainder factor comes from the adjusted payout rate and the number of years. For a life CRUT, mortality tables replace the fixed term. Either way, the IRS supplies the actuarial factors; you don’t build them from scratch.

Nobody runs these by hand in practice. Trust counsel, CPAs, and planned-giving officers use IRS actuarial calculators or third-party planned-giving software to look up the factors and model scenarios. Changing the payout rate, switching between CRAT and CRUT, or testing a different Section 7520 month takes minutes.

The 10% Remainder Floor

Every CRT has to pass a threshold at funding: the present value of the charity’s remainder must equal at least 10% of the net fair market value of the assets you contribute.² If the calculated remainder falls below 10%, the trust doesn’t qualify. You lose the income tax deduction entirely, and the trust is treated as an ordinary taxable trust rather than a tax-exempt vehicle.

The test usually breaks when the payout rate is high, the term is long, or the Section 7520 rate is unfavorable. A young donor wanting a lifetime CRAT at a 7% payout may find the combination fails. The fix is dropping the payout rate, shortening the term, or waiting for a better 7520 rate.

The 5% Probability Test for Lifetime CRATs

CRATs face a second hurdle CRUTs don’t. Because a CRAT pays a fixed dollar amount regardless of performance, the trust could theoretically exhaust itself before the beneficiary dies. The IRS requires that the probability of exhaustion during the beneficiary’s lifetime be less than 5%. Fail that and the deduction is denied. The test applies only to lifetime CRATs, not to term-of-years CRATs or any CRUT, since CRUT payments automatically shrink when the trust value drops.

There’s a workaround. A CRAT can include an early-termination clause providing that if the corpus falls to 10% of its initial value, the trust ends and the remainder goes to charity. A CRAT with that language can qualify even when it would otherwise fail the probability test.

CRUT Variations That Change the Calculation

Not every CRUT uses the same payment mechanic, and the variant you choose changes the deduction inputs.

Standard CRUT. Pays the stated percentage of annual trust value every year. This is the version the basic calculation above describes.
Net income CRUT (NICRUT). Pays the lesser of the trust’s actual net income or the stated unitrust percentage. Because the IRS assumes the trust retains more assets, a NICRUT typically produces a larger deduction than a standard CRUT with the same stated payout.
Net income with makeup CRUT (NIMCRUT). Works like a NICRUT, but shortfalls accumulate in a makeup account. In later years when the trust earns more than the stated percentage, the excess pays down past shortfalls. Common for trusts funded with illiquid assets like real estate that don’t produce income until sold.
Flip CRUT. Starts as a NIMCRUT and flips to a standard CRUT on a triggering event, often the sale of the contributed asset. Before the flip, the calculation treats it as a NIMCRUT; after, as a standard CRUT.

The IRS publishes separate factors and calculation rules for each variant. If you’re using anything other than a standard CRUT, the software inputs change and the deduction amount will differ from the standard calculation.

What You Can Actually Deduct This Year

The formula above produces the gross deduction, meaning the full present value of the charitable remainder. What you can actually claim in a single tax year is capped by your adjusted gross income, and the cap depends on what you contributed and what type of charity gets the remainder.

Cash to a public charity: up to 60% of AGI.⁶
Long-term appreciated property to a public charity: up to 30% of AGI.
Cash to a private non-operating foundation: up to 30% of AGI.
Long-term appreciated property to a private non-operating foundation: up to 20% of AGI.

Say you calculate a $400,000 deduction, your AGI is $500,000, and you contributed appreciated stock naming a public charity as remainder beneficiary. You can only claim $150,000 this year, because 30% of $500,000 is your ceiling. The remaining $250,000 isn’t lost. The IRS lets you carry it forward and deduct it over the next five tax years, subject to the same annual percentage cap each year.⁶ Track the unused balance carefully. Anything still sitting there after the five-year window is gone.

One planning wrinkle for appreciated property: you can elect to use cost basis instead of fair market value for the deduction, which drops you into the higher 60% bracket for a public charity gift instead of the 30% bracket. That election occasionally pencils out when basis is close to fair market value, but for the highly appreciated assets that make CRTs attractive in the first place, it rarely helps.

Claiming the Deduction on Your Return

You claim the CRT deduction on Schedule A (Form 1040) as an itemized deduction.⁷ If you contributed noncash property and the total deduction exceeds $500, you also file Form 8283, Noncash Charitable Contributions.⁸ When the noncash deduction exceeds $5,000, you need a qualified appraisal from a qualified appraiser, and the appraiser has to sign Section B of Form 8283.⁹ The IRS treats the appraisal rule strictly. Skipping it, or using someone who doesn’t meet the qualified-appraiser standard, can cost you the entire deduction.

1
Internal Revenue Service. Section 7520 Interest Rates
2
Office of the Law Revision Counsel. 26 USC 664 – Charitable Remainder Trusts
3
Internal Revenue Service. Charitable Remainder Trusts
4
Office of the Law Revision Counsel. 26 USC 7520 – Valuation Tables
5
Internal Revenue Service. Instructions for Form 5227 – Split-Interest Trust Information Return
6
Office of the Law Revision Counsel. 26 USC 170 – Charitable, Etc, Contributions and Gifts
7
Internal Revenue Service. Topic No. 506, Charitable Contributions
8
Internal Revenue Service. About Form 8283, Noncash Charitable Contributions
9
Internal Revenue Service. Instructions for Form 8283