New IRS Reporting for Qualified Charitable Distributions (QCDs): What You Need to Know for 2025
- Christian West
- Oct 7
- 3 min read
For retirees who give charitably, Qualified Charitable Distributions (QCDs) are one of the most tax-efficient ways to support a cause. Starting in 2025, the IRS is making an important update that simplifies how these charitable IRA distributions are reported—reducing confusion and potential tax errors.
What Is a Qualified Charitable Distribution (QCD)?
A Qualified Charitable Distribution allows individuals age 70½ or older to donate up to $108,000 per year ($216,000 for married couples filing jointly) directly from an IRA to an eligible charity in 2025.
A QCD can:
Count toward your Required Minimum Distribution (RMD), and
Exclude the donated amount from taxable income, which may help lower Medicare premiums and reduce exposure to income-based phaseouts.
To qualify, the transfer must go directly from your IRA custodian to the charity—you can’t take possession of the funds first.
Before 2025: The Confusion Around Reporting
Historically, IRA custodians did not have a way to distinguish QCDs from regular IRA withdrawals.All distributions—taxable and charitable—appeared together on Form 1099-R, usually with distribution code 7 (normal distribution) in Box 7.
That meant:
The total IRA distribution was reported to the IRS, but
It was up to the taxpayer (or preparer) to note the QCD on their Form 1040, often by writing “QCD” beside the taxable income line.
If this step was missed, the QCD could accidentally be taxed as ordinary income—resulting in overpaid taxes and a missed charitable benefit.
What’s Changing in 2025
Beginning with 2025 tax reporting, the IRS will require custodians to specifically identify QCDs on Form 1099-R using a new distribution code “Y.”
Code Y will appear in Box 7 of Form 1099-R.
It may appear alongside existing codes such as:
7Y = Normal distribution with a QCD component
4Y = Death distribution with a QCD component
While the total distribution amount will still appear on a single 1099-R, this new code signals to the IRS and tax software that a portion represents a QCD.
What This Means for You
Better clarity: Your Form 1099-R will now distinguish between regular withdrawals and charitable transfers.
Less risk of error: Tax software and preparers will automatically recognize that part of your IRA distribution was a QCD.
Same taxpayer responsibility: You must still ensure your distribution qualifies:
You’re at least 70½ when the distribution is made.
The funds go directly from the IRA custodian to the qualified charity.
The charity is eligible (not a donor-advised fund or private foundation).
You’ll continue to report the full distribution and taxable portion on your Form 1040, but the “Y” code should now make it easier to file correctly.
Why the Change Matters
Simplifies tax reporting for IRA owners and preparers
Reduces errors and helps ensure QCDs are not mistakenly taxed
Improves transparency between custodians, taxpayers, and the IRS
This update makes it easier for retirees to support charitable organizations while accurately reflecting the tax benefits of their giving.
Example: How the 2025 Reporting Helps
Suppose you take a $50,000 RMD, and $10,000 of it goes directly to a qualified charity as a QCD.
Before 2025: Your 1099-R simply showed $50,000; you had to note “QCD $10,000” manually on your 1040.
Beginning 2025: The 1099-R will include code 7Y, signaling that $10,000 of the total $50,000 distribution qualifies as a QCD—helping your return reflect the correct taxable amount automatically.
The Bottom Line
This change helps retirees and their advisors better document charitable giving and avoid costly mistakes. If you make charitable donations from your IRA, it’s a good time to review your strategy before the 2025 filing year to ensure future QCDs are properly handled.
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Disclosure:This content is for informational and educational purposes only and should not be interpreted as financial, tax, or legal advice. While every effort has been made to ensure accuracy, we cannot guarantee the completeness or reliability of the information provided. Tax laws are subject to change, and individual circumstances vary. Please consult with a qualified tax professional or financial advisor before implementing any charitable or tax-related strategies. Past performance or tax treatment is not indicative of future results.
