How should taxpayers document QCDs to satisfy IRS substantiation requirements?
Executive summary
Qualified charitable distributions (QCDs must be made directly from an IRA trustee to an eligible charity by a donor age 70½ or older and can be excluded from taxable income if rules are met (Pub. 590‑B) [1]. To satisfy IRS substantiation, taxpayers need contemporaneous written acknowledgments from the charity showing the amount and date, retain IRA account records showing the trustee-to-charity transfer, and correctly report the distribution on Form 1040 using Form 1099‑R information (Pub. 526; Pub. 590‑B; practitioner guidance) [2] [1] [3].
1. What the IRS requires — the legal baseline
A QCD is generally nontaxable only when the distribution is made directly by the IRA trustee to a qualified organization, the donor is at least 70½ at the time of transfer, and the gift otherwise meets the same substantiation rules that apply to charitable contributions under Sec. 170 (Pub. 590‑B; Pub. 526) [1] [2].
2. Documentary proof from the charity — the heart of substantiation
Taxpayers should get a contemporaneous written acknowledgement from the charity that states the amount, the date, and that no goods or services were provided in return; the charity’s statement must meet the same acknowledgement standards required for deductible gifts of $250 or more (ACSTechnologies; Pub. 526; Ed Slott guidance) [4] [2] [5].
3. Custodian records and the chain-of-title — prove the transfer was trustee-to-charity
Retain IRA account statements and trustee confirmations that show the payment left the IRA and was sent to the charitable organization (TrustWell; Ed Slott; Journal of Accountancy) [6] [5] [7]. These records are critical because historically Form 1099‑R did not separately identify QCDs and the taxpayer bore responsibility to substantiate the exclusion (Ed Slott; Journal of Accountancy) [5] [7].
4. Reporting on tax forms — how to reflect the QCD on Form 1040
Report the full distribution shown on Form 1099‑R on line 4a of Form 1040 and the taxable portion on line 4b; the QCD exclusion is reflected by reducing the taxable portion reported on line 4b so the nontaxable QCD is not included in AGI (Brach Eichler; TrustWell) [3] [6]. Tax software and preparers should be instructed to treat the QCD portion as an exclusion, and taxpayers must keep the substantiation in case the IRS questions the exclusion (TrustWell; PG Calc commentary) [6] [8].
5. New reporting code — what changes (and what doesn’t) in 2025 and beyond
Beginning with distributions made in 2025, custodians are instructed to use Code Y in Box 7 of Form 1099‑R to identify QCDs (Code Y may be optional for 2025 reporting), which should simplify matching and reduce taxpayer confusion; nevertheless taxpayers must still maintain the charity acknowledgement and IRA statements because neither custodians nor the IRS determine whether QCD conditions were actually met — that remains the donor’s responsibility (Wolters Kluwer; Ascensus; PG Calc) [9] [10] [8].
6. Practical checklist and controversies to watch
In practice, keep: the trustee’s transfer record or IRA statement showing the direct payment to the charity, the charity’s written acknowledgement with date and amount, and the Form 1099‑R and tax return entries showing the exclusion — together these meet IRS substantiation standards and help if the 1099‑R lacks a QCD code (Ed Slott; ACSTechnologies; Brach Eichler) [5] [4] [3]. Note competing perspectives: custodians and software vendors welcome Code Y as simplification (Ascensus; Wolters Kluwer), while tax professionals caution that the donor still bears ultimate responsibility to prove compliance with the substantive QCD rules and substantiation requirements (PG Calc; Journal of Accountancy) [10] [9] [8] [7].