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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