The income tax deduction is a deduction that a donor may declare on his or her income tax return (Form 1040) that reduces the amount of income tax the taxpayer owes.
In the context of planned giving, the donor of a gift annuity, charitable remainder trust, pooled income fund contribution, or retained life estate earns an income tax deduction for the value of the gift to the charity. The amount of the deduction equals the amount transferred minus the value of the income stream that the plan will pay to the individuals during its term. For example, if a donor funds a charitable remainder unitrust with $100,000 and the value of the income stream to the trust's income beneficiaries is $60,000, the donor's income tax deduction will be $40,000, not the whole $100,000.
You can compute the income tax deduction earned by a planned gift using Planned Giving Manager in Basic Gift Illustrations, First Year Analysis, or Life Income Projections.
