FREE NEWSLETTER
I read this Morningstar article this morning. I thought I had posted it then. Although is not pertinent to me I know it is to other HD readers.
Until now, however, QCDs came with a thorny reporting headache. They were reported on IRS Form 1099-R as a regular distribution from an IRA, with no indication that the amount was a QCD.
Effective 2025, an IRA custodian may enter Code Y in Box 7 of Form 1099-R to show that the amount represents a QCD. Code Y is paired with another distribution code to provide more detail:
Here is the web address for the article:
Not quite old enough yet but definitely planning on utilizing QCDs once we can, so this is good news.
Just to be clear, the Code Y reporting is optional for 2025 (the IRS waited too long to provide rules covering it) but becomes mandatory for 2026 and beyond.
Right you are, B. Carr. I just made a call to Schwab, the custodian of my SIMPLE IRA from which I recently took both QCDs and the balance as a “normal” RMD. They told me that in fact they won’t be doing Code Y designations till 2026.
David, thanks for the heads up and the link to the helpful Morningstar article. This is a bit of good news from the IRS.
Bill Perry previewed this welcome change a while back: New in 2025 – Code Y on 1099-R box 7 for QCD’s – HumbleDollar He also commented:
My expectation is if you take both a QCD and other distributions from the same IRA in 2025 that you will receive two 1099-R’s, one with code Y for QCD and one for normal distributions.
I hope this turns out to be the case. It will be helpful to those of us who take some QCDS, and then the balance of our RMD amount as a “normal” RMD.
Excellent point Andrew.
Thanks, Dan. As per my reply to B Carr above, looks like Schwab clients will have to wait till 2026 for any Code Ys at all.
Also, I suppose they could have added a line on the 1099R for the amount of the total distribution attributable to a QCD. That would eliminate the need for a separate form; two forms will confuse the dickens out of some folk, and cost the issuers money.
David, thank you. This doesn’t affect us now, but will in several years. Chris
Free Newsletter
Arrives weekly.