Effective for tax year 2025, the Internal Revenue Service (IRS) is making changes to how certain retirement and education account distributions are reported.
These changes affect:
If you are at least age 70½ and donate directly from your IRA to a qualified charity that meets the IRS QCD requirements, Form 1099-R will include a new distribution code to make it easier for you and your tax preparer when completing your income taxes.
The IRS has introduced code Y to indicate a QCD. This new code will be combined with either existing code 7 for a normal distribution or existing code 4 for a beneficiary distribution, when applicable.
For example:
o Combined code Y7 will be used for normal distribution QCDs
o Combined code Y4 will be used for inherited IRA–related QCDs
While this code is now in effect, the IRS has announced that use of code Y is optional for 2025. Capital Group will report QCDs, as required, beginning with the 2026 IRS Form 1099-R. Until the changes take effect, any QCDs will be classified as age-based distributions (early or normal) and will be subsequently corrected to reflect the appropriate distribution type on the 2026 1099-R.
To request a QCD, you must submit the IRA Qualified Charitable Distribution Request, which includes the required certification language and must be signature guaranteed. A letter of instruction cannot be accepted.
The IRS has implemented these changes to make tax reporting clearer and reduce filing errors. For additional details, visit IRS.gov/Form1099-R and IRS.gov/Form1099-Q.