I am 75 with an IRA, receiving 2025 RMD. Part of the RMD paid directly to my church. Am I correct in assuming I do not have to include this amount in my taxable income?

[bruce-carr49]

I use the standard exemption, so not itemizing deductions

[rjs · Accepted solution]

The money that the IRA custodian pays directly to the church is called a Qualified Charitable Distribution (QCD). It will not be included in your taxable income, but it still has to be shown on your tax return. You will get a Form 1099-R in January that shows all of the money that was distributed from your IRA, including the QCD. You have to enter the 1099-R in TurboTax.

You didn't say whether you are asking about 2024 or 2025. For 2024 the 1099-R does not show how much of the money that you took out of the IRA was a QCD. After you enter the 1099-R in TurboTax, continue through the questions. One of the screens will ask you whether any of the distribution was transferred to charity. That's where you will indicate how much was a QCD, and it will be excluded from your taxable income.

The IRS is changing how QCDs are reported for 2025. They have not yet issued detailed instructions, so we don't know exactly how it will work. But the result will be the same. You will have to enter the amount that was sent to the church, but it will not be included in your taxable income.

[VolvoGirl]

While entering your form 1099-R, if you have entered a birth date which makes you older than 70 1/2 in the tax year, TurboTax will ask you if any portion of your distribution was transferred to charity. You can then enter the amount transferred to charity. For a QCD, check 1040 line 4b. It should be 0 (unless you have other taxable 1099Rs) and QCD written by it.

To qualify as a QCD, the distribution must have taken place DIRECTLY from the account trustee to the charity. It's ok for them to send you a check made out to the Charity that you then mail to the Charity. Withdrawing funds and then making your own contribution to a charity DOES NOT qualify as a QCD. If you withdraw funds from your IRA and donate those funds to a charity, the withdrawal is fully taxable and you can deduct it as an itemized deduction if you itemize on Schedule A and don't take the Standard Deduction.

[NCperson]

@VolvoGirl @bruce-carr49 per the draft form issued by the IRS, the QCD will be coded with a "Y" in Box 7.

https://www.irs.gov/pub/irs-dft/f1099r--dft.pdf

see page 9. 

I suspect that TT and other software packages will program the software to correctly report the taxable income once they see the "code Y".

[VolvoGirl]

So will they get 2 1099R forms?  

[NCperson]

@VolvoGirl that point I am not clear on.  this is what the 2025 1099-R instructions state: 

To report a QCD use code Y with:
• Code 7 for a QCD from a non-inherited (normal distribution) IRA,
• Code 4 for a QCD from an inherited (death distribution) IRA, or
• Code K for a QCD reporting distributions of traditional IRA assets not having a readily available FMV that are
either from non-inherited or inherited IRAs.

So it suggests it's one 1099-R with two codes in Box 7.

[rjs]

@VolvoGirl  @NCperson 

The new distribution code Y, and the very sparse IRS instructions, raise a lot of questions. There is no place on the 2025 Form 1099-R to indicate how much of the total distribution in box 1 is a QCD and how much is not a QCD. And the IRA custodian is not really able to determine whether a distribution is a valid QCD. The custodian cannot be expected to determine whether an organization that a distribution is sent to is a qualified charity. Also, the custodian cannot determine whether the taxpayer has exceeded the maximum QCD amount for the year, since the taxpayer could have IRA accounts with other custodians.

From what we know now, it is likely that some valid QCDs will not be reported with code Y, and some distributions that are reported with code Y will not be valid QCDs. TurboTax is going to have to make provisions for such situations.

We await more detailed guidance from the IRS.