At 71 She’ll Give Her House to Her Church but Keep Living in It. She Can Take a Tax Deduction Now for a Gift the Church Gets Later

She’s 71, sitting on the same front porch she’s used for decades, and she isn’t planning to leave. She’s already decided the house goes to her church someday. What she may not know is that she can sign the house over now, keep living in it for the rest of her life, and take a tax deduction this year.

That setup is called a retained life estate. In plain words, she gives the church the house but keeps the right to live there until she dies. The church’s share, the part it gets later, is called the remainder interest. Lots of charities handle these gifts. The American Cancer Society’s planned giving office, for one, walks donors through them and spells out who pays for what.

A Rare IRS Exception Covers Her Exact Situation

Normally you can’t deduct a gift of only part of something you own. Homes are an exception. IRS Publication 526 describes almost her exact case: “You keep the right to live in your home during your lifetime and give your church a remainder interest that begins upon your death. You can deduct the value of the remainder interest.” The tax code backs this up in 26 U.S.C. § 170(f)(3)(B)(i). Any qualified charity works. The church is just her pick.

She Deducts a Discounted Slice of the House’s Value

The church has to wait, so the IRS discounts the gift. The math uses IRS actuarial tables tied to her age, plus a monthly interest rate called the Section 7520 rate. For November 2026, that rate is 6.2%. The law also requires factoring in depreciation (computed on the straight-line method) on the property. Higher rates shrink the deduction. Older donors get bigger ones.

Here’s a rough example. Say her house appraises at $400,000. The IRS uses actuarial variable tables based on her age and the applicable Section 7520 rate to value the church’s remainder interest. The calculation also accounts for depreciation of the building, so the deduction will be less than the home’s full value. A qualified appraiser and the charity’s planned giving office can help establish the amount. If she itemizes, the deduction can reduce her federal income taxes, although the savings depend on her tax bracket and how much she can deduct each year.

Being in the 22% bracket and using the full deduction saves about $30,000 in federal tax.

Her Income Decides How Fast She Can Use It

A house that’s gone up in value counts as capital gain property. For those gifts to churches and similar charities, Publication 526 generally caps the deduction at 30% of your AGI (adjusted gross income). With $80,000 of AGI, that’s a $24,000 annual limit before accounting for the 0.5% charitable deduction floor. Any unused deduction generally carries forward for up to five years, subject to the applicable limits. The actual tax savings depend on her other deductions and taxable income.

She has to itemize to benefit. The new deduction for non-itemizers tops out at $1,000 ($2,000 on a joint return) and covers only cash gifts, so a house doesn’t count. Paperwork matters too, as any noncash deduction over $5,000 requires a qualified appraisal, a written acknowledgment from the charity, and Form 8283, Section B. Appraisal fees aren’t deductible as a gift.

What She Keeps, What She Still Pays For

Of course, don’t forget that if she keeps living there, she also keeps the bills. The American Cancer Society’s FAQ says donors remain responsible for taxes, insurance, and maintenance, and that major improvements may need the charity’s approval.

The gift can’t be undone. If she needs assisted living at 84, she can’t just sell. She’d need the church to agree, usually by renting the place out (if the contract allows) or selling together and splitting the money.

Three Other Routes to the Same Church

1. Leave it in her will. No deduction now, but full control. She can sell, move, or change her mind anytime.
2. Charitable remainder trust. The house goes into a trust, usually gets sold, and pays her income for life. It fits someone ready to move out soon.
3. Transfer-on-death deed. Where states allow it, the house goes to the church at death without probate. It’s revocable, but there’s no income tax deduction.

If she has an IRA, qualified charitable distributions can also cover her church giving today without itemizing.

Which Path Fits Most People Like Her

If she itemizes, has steady taxable income, and is confident she’ll stay, the retained life estate is the better deal. A deduction now covers something the church was getting anyway. If there’s a real chance she’ll need to move, or she takes the standard deduction, a transfer-on-death deed or will gives the same gift with no strings.

The biggest mistake is having a lawyer draft a deed first. Her first call should be the church’s planned giving office. It’ll tell her whether the church accepts these gifts, what it expects on upkeep and moving out, and what her real deduction looks like at today’s rate. A retained life estate is one of several tax-smart ways to give while you’re still alive, and we walked through the rest- donor-advised funds, QCDs, and appreciated-stock gifts- in a free guide here.

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