'For Occidental Petroleum employees and retirees who are considering charitable giving, understanding how Qualified Charitable Distributions are reported and coordinating with qualified tax professionals can help support more informed retirement planning decisions, and Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group, encourages individuals to review their overall retirement strategy with experienced financial professionals while seeking individualized tax guidance from their tax advisor.' – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group.

'For Occidental Petroleum employees and retirees, staying informed about Qualified Charitable Distribution rules and IRS reporting updates can help make charitable giving a more effective part of a broader retirement plan, and Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group, encourages individuals to coordinate their retirement planning with financial professionals and consult their tax advisor for guidance specific to their situation.' – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group

In this article we will discuss:

1. How Qualified Charitable Distributions (QCDs) work and the IRS eligibility requirements for making tax-efficient charitable gifts from an IRA.

2. The new IRS Code Y on Form 1099-R and how it simplifies reporting Qualified Charitable Distributions beginning with 2025 reporting.

3. Important planning considerations and common misconceptions about QCDs, including reporting responsibilities, Roth IRA rules, and potential retirement income tax benefits.

The option for people who are at least  70½ years old  to donate up to  $108,000 (2025 maximum)  directly from their IRA to an approved charity is one of the most tax-friendly features available to eligible IRA owners. We refer to this strategy as a Qualified Charitable Distribution (QCD). Your taxable income does not include a QCD, making it an important retirement planning consideration for many Occidental Petroleum employees. Unlike a traditional charitable contribution, which may only provide a tax deduction if you itemize, a QCD can offer a tax benefit without requiring you to itemize deductions.

The age requirement for making a QCD remains  70½ , even though the age for required minimum distributions (RMDs) has increased to  73 . Married spouses filing jointly may each contribute up to the annual QCD limit from their own IRAs.

Until recently, QCDs created a reporting challenge. IRA custodians generally reported these distributions on IRS Form 1099-R as standard IRA distributions rather than identifying them as Qualified Charitable Distributions. As a result, taxpayers and their tax preparers needed to correctly report the QCD on Form 1040 so it was excluded from taxable income, a process that occasionally resulted in misunderstandings or reporting errors.

Beginning with  2025 reporting , the IRS simplified this process by introducing  Code Y  on Form 1099-R to identify Qualified Charitable Distributions.

The New Code Y for Qualified Charitable Distributions

Starting with 2025 reporting, IRA custodians may identify a Qualified Charitable Distribution by entering  Code Y  in Box 7 of Form 1099-R. Code Y is used alongside another distribution code to provide additional information:

• - A QCD from a non-inherited (regular distribution) IRA uses Code 7.

• - A QCD from an inherited IRA uses Code 4.

• - A QCD involving traditional IRA assets without a readily available fair market value uses Code K.

• Code Y works well when the entire distribution qualifies as a QCD. If only part of the distribution qualifies, the eligible amount must still be accurately determined and properly reported.

The Myth About QCDs and Roth IRAs

Many people believe Roth IRAs cannot be used for Qualified Charitable Distributions. However, IRS guidance indicates that, under certain circumstances, QCDs may be made from Roth IRAs. Although technically permitted, this is generally not considered an advantageous tax-planning strategy because qualified Roth IRA distributions are typically already tax-free.

Not Every Charitable Gift Qualifies as a QCD

A Qualified Charitable Distribution is available only if:

• - You are at least  70½ years old.

• - The funds are transferred directly from your IRA to a qualified charitable organization.

Before requesting a QCD, it is important to review the applicable IRS requirements because eligibility depends on meeting all qualifying rules.

Regular Charitable Donations vs. Qualified Charitable Distributions

If you itemize deductions, charitable gifts made from your checking account or other non-IRA assets may qualify for a tax deduction, subject to applicable IRS limits.

A Qualified Charitable Distribution, however, is excluded from taxable income. Keeping taxable income lower may also help reduce Medicare premium surcharges and other income-related costs, which can be an important consideration for retirees, including many former Occidental Petroleum employees.

For example, Jane, age 74, is required to take a $20,000 minimum distribution from her traditional IRA. She instructs her IRA custodian to transfer $15,000 directly to a qualified charity as a QCD. Because the $15,000 qualifies as a QCD, it is excluded from her taxable income. As a result, her adjusted gross income remains lower, which may reduce the likelihood of higher Medicare premiums. Had she received the full $20,000 personally before making the charitable gift, the entire amount would generally have been included in her taxable income before any charitable deduction was considered.

Your Responsibility in the QCD Process

Your IRA custodian cannot determine whether your distribution satisfies every IRS requirement for a Qualified Charitable Distribution. When reporting a QCD up to the applicable annual limit, custodians are permitted to rely on your reasonable representations. Many custodians include a checkbox on their distribution request forms that allows you to indicate your intent to make a Qualified Charitable Distribution.

Although custodians typically do not withhold taxes on distributions intended to qualify as QCDs, they cannot verify that every IRS requirement has been satisfied. You and your tax preparer remain responsible for confirming the distribution qualifies and is correctly reported.

What If Your Custodian Does Not Use Code Y?

Although Code Y became available beginning with 2025 reporting, the IRS made its use optional for that reporting year. As a result, not every IRA custodian immediately adopted the new reporting code.

If your 2025 Form 1099-R does not include Code Y, continue following the standard reporting process by informing your tax preparer of the amount that qualifies as a Qualified Charitable Distribution so it can be accurately reported on your federal income tax return.

Code Y Simplifies Reporting, But Accuracy Still Matters

The introduction of Code Y is a helpful improvement because it makes Qualified Charitable Distributions easier to identify on Form 1099-R and may reduce reporting errors. Even with this change, taxpayers should continue maintaining accurate records and working closely with their tax preparer to help confirm their QCD is reported correctly.

When used appropriately, Qualified Charitable Distributions remain one of the most tax-efficient charitable giving strategies available to eligible IRA owners and may be a valuable planning opportunity for employees and retirees with ties to Occidental Petroleum.

If you have questions about how a Qualified Charitable Distribution could fit into your retirement income strategy, The Retirement Group can help you review your retirement planning options. To learn more about retirement planning considerations that may apply to your situation, call The Retirement Group at  (800) 900-5867  and speak with a member of the team.

Sources:

1.  Internal Revenue Service.  Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs).  U.S. Department of the Treasury, Mar. 2025,  https://www.irs.gov/publications/p590b.

2.  Internal Revenue Service.  2026 Instructions for Forms 1099-R and 5498.  U.S. Department of the Treasury, 2025,  https://www.irs.gov/instructions/i1099r .

3.  Fidelity Investments. 'Qualified Charitable Distributions (QCDs).'  Fidelity , updated 2025,  https://www.fidelity.com .

4.  Charles Schwab & Co., Inc. 'Qualified Charitable Distributions (QCDs): Rules and Benefits.'  Charles Schwab , updated 2025,  https://www.schwab.com .

5.  Vanguard. 'Qualified Charitable Distributions (QCDs).'  Vanguard , updated 2025,  https://investor.vanguard.com .