Charitable Remainder Trust: Real Estate Rules and IRS Data 2026

What a charitable remainder trust is, in the words of Section 664

A CRT is a gift with a payment stream attached. You transfer property to an irrevocable trust; the trust pays a "noncharitable" beneficiary (usually you, or you and a spouse) every year; when the term ends, the trust's assets go to one or more charities. The deduction rule says why this shape is the only one that works: “no deduction shall be allowed under this section for the value of a contribution of a remainder interest unless the trust is a charitable remainder annuity trust or a charitable remainder unitrust (described in section 664), or a pooled income fund” (26 U.S.C. 170(f)(2)(A)).

Source: 26 U.S.C. 170 and 664, United States Code 2024 edition (govinfo.gov). uscode.house.gov was under maintenance on October 11, 2026.

The exemption is literal: a CRAT or CRUT “shall, for any taxable year, not be subject to any tax imposed by this subtitle” (Section 664(c)(1)). The catch is the character rule in Section 664(b). Every payment is treated as coming “First, as amounts of income (other than gains...)”, then as capital gain “to the extent of the capital gain of the trust for the year and the undistributed capital gain of the trust for prior years”, and only at the end as a distribution of corpus. So the trust does not erase the gain on your property; it holds it and releases it to you a slice at a time (our reading). What you gain is that the whole sale price stays invested, and that you receive an income tax deduction on the day of the gift.

The regulations add a condition that matters for anyone who wants to fix a structure later: a trust “must meet the definition of and function exclusively as a charitable remainder trust from the creation of the trust” (26 CFR 1.664-1(a)(4)). For a deeper look at the gain you would otherwise pay, see our guide to capital gains tax on real estate.

CRAT vs CRUT for an appreciated property

Sources: 26 U.S.C. 664; 26 CFR 1.664-3 and 1.6011-15; IRS SOI split-interest trust Tables 3 and 6, filing year 2012.

For real estate the unitrust has a feature the annuity trust lacks. Section 664(d)(3) lets a CRUT pay “the amount of the trust income, if such amount is less than” the fixed percentage, plus a catch-up in later years (a NIMCRUT). The regulations then allow a combination: income only at first, the fixed percentage afterward, if the switch is “triggered on a specific date or by a single event whose occurrence is not discretionary with, or within the control of, the trustees or any other persons” (26 CFR 1.664-3(a)(1)(i)(c)(1)). The sale of the property qualifies: “a triggering event based on the sale of unmarketable assets as defined in § 1.664-1(a)(7)(ii)... will not be considered discretionary” (26 CFR 1.664-3(a)(1)(i)(d)). The first example in the regulation is a trust “funded with the donor's former personal residence” that switches the year after the house is sold. That is the FLIP CRUT, and it answers the problem of a land parcel that may take two years to sell (our reading).

October 2026: what a 5.6% Section 7520 rate does

The value of the charity's share, and so your deduction and the 10% test, is computed at the Section 7520 rate for the month of the gift. The IRS publishes it each month:

Source: IRS, "Section 7520 interest rates" page, last updated September 25, 2026. All ten months of 2026 are in the CSV.

For a CRAT, the regulation allows an election to use “the interest rate component for either of the 2 months preceding the month in which the transfer is made” (26 CFR 1.664-2(c)). For a gift in October 2026 the choice is 5.2%, 5.4% or 5.6%.

The rate also decides whether a life CRAT is allowed at all. Rev. Rul. 70-452, applied to CRATs in Rev. Rul. 77-374, holds that if there is “a greater than 5 percent probability” that the annuity will exhaust the trust before the charity receives anything, no deduction is allowed. Rev. Proc. 2016-42 described the effect of low rates: in May 2016, at 1.8%, the sole life beneficiary of a 5% CRAT “must be at least 72 years old at the creation of the trust”, and the rate “has not exceeded the minimum 5 percent annuity payout rate since December of 2007”. It also gave the rule that now applies in the other direction: “If the § 7520 rate at creation of a trust providing an annual annuity payment at the end of each year is equal to or greater than the percentage used to determine the annuity payment, then exhaustion will never occur under this test.” Every month since May 2026 the rate has been 5.0% or higher, so a 5% CRAT paid at the end of each year passes that test at any age (our reading). Rev. Proc. 2016-42 remains the IRS's alternative for trusts paying more: a sample clause that ends the trust early if the discounted corpus would fall below 10% of the initial value.

Worked example: a $2,000,000 property in a 20-year trust, October 2026

Assumptions (ours, for illustration): a property worth $2,000,000 with a basis of $400,000, owned for many years and free of debt, transferred in October 2026 to a trust paying 5% once a year at the end of each year for 20 years, with a public charity as remainderman. The factors come from the IRS tables in the regulations; the multiplication is ours.

Sources: Section 7520 rate from irs.gov; Table B from 26 CFR 20.2031-7(d)(6); Tables D and F(5.6) from 26 CFR 1.664-4(e)(6) (eCFR, current to October 7, 2026). Our arithmetic; the regulations require interpolation for an adjusted payout between table rates, as we did. This is an illustration, not a calculator, and not a figure for your return.

What the example leaves out matters as much as what it shows (our reading):

• The deduction is not usable all at once. A gift of capital gain property to a public charity counts only up to “30 percent of the taxpayer's contribution base” each year, with the excess carried to “each of the 5 succeeding taxable years” (26 U.S.C. 170(b)(1)(C)). From 2026 two new limits apply: contributions count only above 0.5% of the contribution base (P.L. 119-21 section 70425, adding Section 170(b)(1)(I)), and itemized deductions of taxpayers in the 37% bracket are reduced by 2/37 of the lesser of the deductions or the income above that bracket's threshold (P.L. 119-21 section 70111, rewriting Section 68). Both apply to taxable years beginning after December 31, 2025.
• A private foundation as remainderman shrinks the deduction. Section 170(e)(1)(B)(ii) reduces a gift of property “to or for the use of a private foundation” by the gain that would have been long-term capital gain, and Section 170(b)(1)(D) caps it at 20% of the contribution base. On our numbers, measuring the CRUT remainder off the $400,000 basis instead of the $2,000,000 value gives about $151,643 instead of $758,214 (our reading and arithmetic).
• The $1,600,000 gain still reaches you. Under Section 664(b), each $100,000 payment is ordinary income to the extent of the trust's ordinary income, then capital gain until the gain from the sale is used up.
• Depreciation. Section 170(e)(1)(A) reduces the deduction by any gain that would not have been long-term capital gain on a sale, and the same paragraph treats business property as a capital asset except for gain to which the recapture rules, including Section 1250(a), apply. Our depreciation recapture guide explains which part of a rental's gain that is.

Real estate traps, with the rule that creates each one

1. A mortgage on the property

Three separate rules meet here (our reading of how they combine):

• Debt-financed income. Section 514(c)(2)(A) says that when property “is acquired subject to a mortgage or other similar lien, the amount of the indebtedness secured by such mortgage or lien shall be considered as an indebtedness of the organization incurred in acquiring such property even though the organization did not assume or agree to pay such indebtedness.” The relief in Section 514(c)(2)(B) is narrow: a gift is spared for 10 years only if the mortgage “was placed on the property more than 5 years before the gift” and the property “was held by the donor more than 5 years before the gift”, and the relief is lost if the trust “assumes and agrees to pay the indebtedness”. Income from the rest is unrelated business taxable income, and in a CRT that is taxed at 100% under Section 664(c)(2). The regulations' own example is real estate: a CRAT “sells real estate generating gain of $40,000”, $30,000 is debt-financed income, and the excise tax is $29,000 after a $1,000 deduction (26 CFR 1.664-1(c)(2), Example 2).
• A grantor trust from the start. Under 26 U.S.C. 677(a)(1), the grantor is treated as owner of any portion of a trust whose income may be “distributed to the grantor or the grantor's spouse”. A trust that pays the donor's mortgage is, in our reading, using income for the grantor, and 26 CFR 1.664-1(a)(4) dates a CRT's creation only from the time no one “is treated as the owner of the entire trust” under those grantor trust rules.
• A partial sale. Section 1011(b) applies to a gift that is partly a sale: “the adjusted basis for determining the gain from such sale shall be that portion of the adjusted basis which bears the same ratio to the adjusted basis as the amount realized bears to the fair market value”. Debt relief is commonly treated as an amount realized, so the donor can owe tax at the gift itself (our reading).

The practical consequence: owners usually pay down or refinance the debt outside the trust, or contribute a different, debt-free asset. The IRS data point the same way: at the end of 2012 CRUTs reported $92.9 million of mortgages and notes payable against $86.86 billion of assets, about 0.1% (our arithmetic).

2. A sale that is already agreed

The trust's tax exemption only helps if the trust, not you, is the seller. In T.C. Memo. 2023-34 (docket 18606-19, filed March 15, 2023), donors gave shares of a family company to a donor-advised fund two days before a sale closed. The Tax Court applied the anticipatory assignment of income doctrine: a donor's right to the proceeds is fixed if the sale has become “practically certain to occur” by the time of the gift. Its rule of thumb: “a donor must bear at least some risk at the time of contribution that the sale will not close.” The court held that the donors “realized and recognized gain” on the sale and “are not entitled to a charitable contribution deduction”, though it declined to impose the accuracy penalty. The same doctrine applies to real estate placed in a CRT after a purchase contract is signed (our reading). Keep the trust free to sell or not, and keep the buyer's contract with the trustee, not with you.

3. Who values the property

Real estate is named in the regulation as an unmarketable asset: “unmarketable assets include real property, closely-held stock, and an unregistered security” (26 CFR 1.664-1(a)(7)(ii)). If the trust holds one, every valuation must be “Performed exclusively by an independent trustee” or “Determined by a current qualified appraisal from a qualified appraiser” (26 CFR 1.664-1(a)(7)(i)). Otherwise the trust “will be treated as failing to function exclusively as a charitable remainder trust”. In a CRUT the property is revalued every year it is held, so an owner who wants to act as trustee needs an appraisal each year until the sale (our reading).

4. Running a business inside the trust

The same 100% excise tax reaches active business income. The regulation's first example has a CRAT with $10,000 of partnership income that is unrelated business taxable income, owing $9,000 of excise tax (26 CFR 1.664-1(c)(2), Example 1). A trust holding a short-term rental operation, a farm partnership or a development LLC is exposed (our reading); a trust holding a sold property's cash and securities is not.

5. The CRAT annuity scheme the IRS listed in July 2026

On July 9, 2026, Treasury and the IRS finalized 26 CFR 1.6011-15 (91 FR 42353), adopting the March 25, 2024 proposal “as final without change”. A transaction is listed if the grantor creates a trust purporting to be a CRAT, funds it with property “having a fair market value in excess of its basis”, the trustee sells it, uses the proceeds “to purchase an annuity”, and the beneficiary treats the payments as an annuity under Section 72 “instead of as carrying out to the beneficiary amounts in the ordinary income and capital gain tiers of the trust in accordance with section 664(b).” The 2024 proposal described the property typically used as “interests in a closely-held business, and/or assets used or produced in a trade or business”, and said the trust's basis is the donor's carryover basis, not the sale price. Participants must file Form 8886 and material advisers Form 8918; the IRS estimates 50 to 100 taxpayers a year are affected. A charity named only as remainderman is not treated as a participant. If an adviser proposes a CRAT that buys an annuity and promises that most of each payment is tax-free, that is the listed pattern (our reading).

What IRS data shows about CRTs

Every CRT files Form 5227, the split-interest trust information return, each year. The IRS Statistics of Income division published detailed tables from those returns for filing years 1999 to 2012; on October 11, 2026, 2012 is still the latest year on its page. The tables are sample estimates in thousands of dollars.

Source: IRS SOI split-interest trust Tables 3 and 6, filing years 2003, 2007 and 2012 (files 02eo03at, 02eo06ut, 07eo03sit, 07eo06sit, 12eo03sit). Billions rounded from thousands.

Four readings of the 2012 tables, all our arithmetic:

• Unitrusts dominate. CRUTs were 86% of CRAT and CRUT returns and 93% of their assets. CRAT returns fell 36% between 2003 and 2012 while CRUT returns were flat, consistent with the low-rate years that Rev. Proc. 2016-42 describes.
• Trusts sell the real estate. Land, buildings and equipment were $884.2 million of CRUT book assets (1.0%) and $64.7 million of CRAT assets (1.0%); at fair market value, CRUT real estate was $1.17 billion of $92.71 billion. Corporate stock ($31.87 billion) and "other investments" ($34.66 billion) held most of the money.
• The deferred gain is visible. CRUTs reported $50.75 billion of undistributed net capital gains at the end of the year, gains already realized inside trusts and waiting to be carried out to beneficiaries under Section 664(b). Of $5.24 billion of CRUT distributions, $3.39 billion (65%) was characterized as capital gain; for CRATs, $230.8 million of $385.3 million (60%).
• A few large trusts hold much of it. The 675 CRUTs with $10 million or more of assets held $38.53 billion, 44% of the total, while they were 0.7% of returns. CRUTs reported $199.3 million of trustee fees in the year.

The IRS does not publish CRT counts after 2012, but it does count returns. Its projections publication lists 90,947 Form 5227 returns actually filed in fiscal year 2024 (42,078 on paper and 48,869 electronically) and projects 86,400 for 2025 and 74,700 for 2032. Form 5227 is also filed by charitable lead trusts, pooled income funds and other split-interest trusts, so this is all of them together: in 2012 the SOI tables count 113,688 such returns across the four types (our sum), against 90,947 in fiscal 2024, a 20% difference (our arithmetic; the two series are measured differently and are not strictly comparable).

How the payments are taxed, year by year

The four tiers decide what a CRT is worth to you after tax. Take the CRAT in our example after the trust sells the property for $2,000,000 and reinvests (our reading and arithmetic, ignoring investment returns for simplicity): the trust's $1,600,000 gain sits in the capital gain tier; each year's $100,000 payment is first ordinary income to the extent of the trust's interest and dividends, and the rest is capital gain. Only after the gain is used up does tax-free corpus come out. What the trust changes is when the gain is taxed, and at whose rates in that year. The 2012 SOI tables show the pattern at scale: $50.75 billion of gain waiting in CRUTs and 65% of their payments taxed as capital gain.

This is also where the July 2026 rule bites: the listed CRATs try to skip exactly these tiers by treating payments as an annuity's return of basis. The final rule calls that the “abusive interpretation of the application or operation of the tier structure under section 664(b)”.

If you want the gain deferred without giving anything to charity, the tools are different: a 1031 exchange, or a Delaware statutory trust as the replacement property.

Verdict

A charitable remainder trust is a sound, statutory tool for one kind of owner: someone with a property that has gone up a great deal, who wants to sell it, wants an income from the proceeds, and genuinely wants a charity to receive at least 10% of the value, and in practice much more. October 2026 is a better month for it than most of the last decade, because the 5.6% Section 7520 rate raises the CRAT deduction and removes the exhaustion problem for 5% life annuities. It is the wrong tool for an owner who expects to keep the money in the family, who has already signed a purchase contract, whose property carries a recent mortgage, or who is being sold a CRAT that buys an annuity. And it is irrevocable: the remainder belongs to charity once the trust is signed.

What a property owner can do with this

• Fund before you negotiate. Put the property in the trust before any letter of intent hardens into a contract, and let the trustee sign the sale (T.C. Memo. 2023-34).
• Check the mortgage dates. If the loan or your ownership is less than five years old, ask in writing how the trust avoids debt-financed income under Section 514(c)(2)(B) and grantor trust status under Section 677.
• Ask for the computation. The deduction must be “supported by a full statement attached to the return showing the computation of the present value” (26 CFR 1.664-2(d)). Ask which month's Section 7520 rate was used and whether the two-month lookback was elected.
• Choose the appraiser or an independent trustee for the property under 26 CFR 1.664-1(a)(7), and a FLIP CRUT if the sale date is uncertain.
• Name a public charity or a donor-advised fund if the deduction matters, not a private foundation (Section 170(e)(1)(B)(ii)).
• Refuse any CRAT that buys an annuity with the sale proceeds and reports it under Section 72 (26 CFR 1.6011-15).

FAQ

Sources, read and saved on October 11, 2026: 26 U.S.C. 170, 514, 664, 677 and 1011 (United States Code 2024 edition, govinfo.gov; uscode.house.gov was under maintenance); P.L. 119-21, sections 70111 and 70425 (govinfo.gov); 26 CFR 1.664-1, 1.664-2, 1.664-3, 1.664-4 and 20.2031-7 (eCFR, current to October 7, 2026); Rev. Proc. 2016-42, Internal Revenue Bulletin 2016-34, which describes Rev. Rul. 70-452 and Rev. Rul. 77-374; IRS Section 7520 interest rates page (updated September 25, 2026); final rule, 91 FR 42353 (July 9, 2026), and proposed rule REG-108761-22, 89 FR 20569 (March 25, 2024), federalregister.gov; U.S. Tax Court, T.C. Memo. 2023-34, docket 18606-19 (ustaxcourt.gov); IRS Statistics of Income split-interest trust tables for filing years 2003, 2007 and 2012 and the SOI table page; IRS Publication 6292 (Rev. 9-2025). Actuarial results, shares, sums and differences are our arithmetic; interpretations marked "our reading" are ours. This is analysis of public documents, not investment, legal or tax advice.