Charitable Remainder Trust (CRT): 2026 Guide & Calculator

A charitable remainder trust lets you sell a highly appreciated asset — real estate, business stock, concentrated RSUs — without triggering capital gains. The trust pays you an income stream for a fixed term or your lifetime, then passes the remaining balance to charity. You receive an immediate charitable deduction in the year of contribution. Three parties benefit: you, your heirs (via estate reduction), and your chosen charity.

How a charitable remainder trust works

You transfer an appreciated asset irrevocably to a charitable remainder trust (CRT). The CRT is a tax-exempt entity under IRC §664 — it sells the asset and pays no capital gains tax. The full sale proceeds stay invested inside the trust. For the trust's term, you (and optionally your spouse) receive annual distributions. When the term ends — either a fixed period of up to 20 years, or the death of the income beneficiaries — the remaining balance passes to the qualified charities you named at the outset.¹

Three things happen at the moment of transfer:

1. Immediate charitable income tax deduction. You deduct the present value of what charity will eventually receive. At a 5% payout rate over 15 years with the April 2026 §7520 rate of 4.6%, that's roughly 47% of the asset's fair market value — deductible in the year of contribution (subject to AGI limits; the excess carries forward five years).
2. Capital gains bypass. The CRT sells the asset tax-free. The capital gains that would have cost you 20% + 3.8% NIIT (23.8% combined for HNW) stay inside the trust, compounding for your benefit over the trust's term.
3. Estate reduction. The transferred asset — and all future appreciation inside the trust — is permanently outside your taxable estate.

CRAT vs. CRUT — which type fits your situation?

CRAT Calculator — estimate your charitable deduction and income

Enter your asset details below. Uses the April 2026 §7520 rate of 4.6% (IRS Rev. Rul. 2026-7).² LTCG and NIIT rates reflect 2026 IRS brackets.³

§7520 rate 4.6% (April 2026, IRS Rev. Rul. 2026-7). Capital gains bypass uses 23.8% rate (20% LTCG + 3.8% NIIT, 2026 IRS brackets). Charity remainder projection assumes 5% blended annual return inside the trust. Results are illustrative — your actual numbers depend on your specific asset type, timing, and return assumptions.

The 10% remainder test — a binding IRS requirement

Under IRC §664(d)(1)(D), every CRAT must pass the 10% remainder test at inception: the present value of the charitable remainder must equal at least 10% of the initial contribution. If your chosen payout rate is too high relative to the trust term and §7520 rate, the trust won't qualify — and you lose the deduction and tax-exempt status entirely.

The calculator above flags this automatically. If your inputs fail the test, the typical fixes are: lower the payout rate, shorten the term, or switch to a CRUT (which has a different test methodology and is generally easier to satisfy). Your estate planning attorney runs the official actuarial calculation before the trust is signed.

How CRT distributions are taxed

Not all distributions from a CRT carry the same tax character. The IRS requires a "four-tier" ordering under Reg. §1.664-1(d): distributions are treated first as ordinary income, then long-term capital gains, then other income (tax-exempt), then return of corpus. In practice:

• For the first several years after a large appreciated asset is sold inside the trust, most distributions will be characterized as capital gains income — taxable to you at the 20% LTCG rate plus 3.8% NIIT.
• Once accumulated capital gains are distributed, the character shifts to ordinary income (trust earnings: interest, dividends).
• Your CPA tracks this annually on IRS Form 5227 (the CRT's annual filing) and issues a Schedule K-1 with the correct character breakdown.

This four-tier ordering is less favorable than it sounds — but it's still significantly better than triggering all capital gains in year one on an outright sale.

CRT vs. direct sale — concrete numbers

Scenario: rental property worth $1M, cost basis $100K, sold in 2026. Married taxpayer in top bracket.

When a CRT makes the most sense

A CRT is not the right tool in every situation. It works best when several conditions align:

• Highly appreciated, low-basis asset. The capital gains bypass is the primary driver of the economics. If the asset is largely basis (little embedded gain), the math rarely pencils out — a direct sale and reinvestment is simpler.
• Genuine charitable intent. The remainder goes to charity irrevocably. You cannot redirect it to heirs later. If keeping wealth in the family is the primary goal, a SLAT, GRAT, or dynasty trust is more appropriate. CRT works well alongside those strategies — use the CRT for the appreciated illiquid asset, the SLAT/GRAT for growth assets you want heirs to receive.
• Income need during the trust term. The income stream is what justifies the structure's cost and irrevocability. If you don't need or want the income, a direct charitable gift, charitable lead trust (CLT), or donor-advised fund is usually simpler and more flexible.
• An asset that is difficult to diversify otherwise. Concentrated stock, closely held business interests, rental real estate with significant embedded gain — these are the assets where the CRT's capital gains bypass creates the most value.

CRT and the $15M estate exemption

The One Big Beautiful Bill Act (OBBBA, July 2025) permanently set the federal estate, gift, and GST exemption at $15M per individual ($30M per married couple), indexed for inflation from 2027.⁴ The anticipated 2026 sunset to ~$7M is gone.

Families below $15M net worth: the CRT's estate-reduction benefit is secondary — the capital gains bypass and charitable deduction are the main draws. Families above $15M: the CRT still reduces the taxable estate (40% estate tax on amounts above exemption), and it pairs well with other irrevocable trust strategies. A $2M rental property moved into a CRT reduces the estate by $2M and avoids the 40% tax on that slice (up to $800K) while also bypassing capital gains.

Common CRT structures for HNW situations

• Business exit CRUT. Founder contributes low-basis stock to a CRUT prior to a sale. The CRUT sells the business tax-free, diversifies into a managed portfolio, and pays the founder 5-7% annually for 20 years or life. Remainder funds a donor-advised fund or named endowment.
• Real estate CRAT. Landlord with $5M building and $500K basis uses a CRAT to exit a cash-flow-positive property without paying $1.07M in capital gains. CRAT pays a fixed annual distribution; simplicity is the appeal for older donors who want predictability.
• Concentrated RSU CRUT. Tech executive with a large position in a single stock uses a CRUT to diversify over time. New RSU tranches can be contributed to the same CRUT in future years (CRUT allows additional contributions; CRAT does not).
• Retirement income supplement. Age 65, portfolio heavy in appreciated assets, modest Social Security. A 20-year CRAT (or lifetime CRUT) generates a predictable income supplement, reduces RMD exposure from a smaller IRA, and satisfies philanthropic goals.

Sources

1. IRS.gov — Charitable Remainder Trusts overview (IRC §664 requirements, CRAT vs. CRUT distinction, 10% remainder test)
2. IRS — Section 7520 Interest Rates (April 2026: 4.6%, IRS Rev. Rul. 2026-7)
3. IRS Tax Topic 409 — Capital Gains and Losses (2026 LTCG rate 20%; NIIT 3.8% per IRC §1411)
4. IRS — Estate and Gift Tax ($15M exemption per individual, OBBBA July 2025, indexed from 2027)

Tax values verified as of April 2026: §7520 rate 4.6% (IRS Rev. Rul. 2026-7); LTCG 20% + NIIT 3.8% (IRS 2026 brackets); IRC §664 5% minimum payout and 10% remainder test (statutory, unchanged); $15M estate exemption per OBBBA (July 2025).