RMDs and Retirement Account Taxes in 2026
Required minimum distributions are a reality for most Americans with traditional retirement accounts who have reached the applicable age. For the 2026 filing season covering the 2025 tax year, understanding how RMDs work, how they are taxed, and what strategies can minimize their impact on your overall tax liability is essential for retirees managing taxable withdrawals from IRAs and employer-sponsored retirement plans.[1][2]
What Are Required Minimum Distributions?
Traditional IRAs, SEP-IRAs, SIMPLE IRAs, and most employer-sponsored retirement plans such as 401(k), 403(b), and 457(b) plans require account holders to begin taking minimum distributions once they reach the applicable age. The distributions are required because contributions to these accounts were made on a pre-tax basis, and the government requires that taxes eventually be collected.[1][3]
The SECURE 2.0 Act, enacted in late 2022, raised the RMD starting age to 73 for individuals who turn 72 after December 31, 2022, and the age will increase further to 75 for individuals born after December 31, 1960. For 2025 returns, the applicable starting age for most filers is 73.[2]
How RMDs Are Calculated
Your annual RMD is calculated by dividing your account balance as of December 31 of the prior year by a life expectancy factor from IRS tables. The IRS provides three different tables: the Uniform Lifetime Table for most account holders, the Joint and Last Survivor Table for account holders whose sole beneficiary is a spouse more than 10 years younger, and the Single Life Expectancy Table for certain beneficiaries.[1][2]
For example, a 75-year-old account holder with a December 31, 2024 IRA balance of $500,000 would divide $500,000 by the applicable life expectancy factor from the Uniform Lifetime Table to arrive at the required distribution for 2025.[3]
How RMDs Are Taxed
RMDs from traditional IRAs and pre-tax employer plans are taxed as ordinary income in the year they are taken. This means they are added to your other income and taxed at your marginal tax rate. For most retirees, this rate ranges from 12 to 22 percent, though large RMDs can push income into higher brackets.[1][2]
RMDs can also cause secondary tax effects, including increasing the portion of Social Security benefits that are taxable, triggering the Medicare high-income surcharge known as IRMAA, and affecting eligibility for certain income-tested deductions and credits.[2][3]
Penalties for Missing RMDs
Failing to take a required distribution by the December 31 deadline (or April 1 for the first RMD year) results in a 25 percent excise tax on the amount that should have been distributed. The SECURE 2.0 Act reduced this penalty from 50 percent, and it can be further reduced to 10 percent if the missed distribution is corrected within two years.[1][3]
Qualified Charitable Distributions as an RMD Strategy
IRA holders who are 70 and a half or older can make qualified charitable distributions directly from their IRA to a qualified charity. Up to $105,000 per year in QCDs is excluded from taxable income and counts toward satisfying the RMD. The tax benefit is particularly valuable for retirees who do not itemize deductions, since the QCD provides an effective deduction without the need to itemize.[1][2]
Inherited IRAs and RMD Rules
Non-spouse beneficiaries who inherited IRAs after January 1, 2020 are generally subject to the 10-year rule under the SECURE Act, which requires the account to be fully distributed within 10 years of the original owner's death. Annual RMDs during the 10-year period may be required if the original owner had already begun taking RMDs. Spouse beneficiaries have different and more flexible options.[2][3]
Roth IRA Exception
Roth IRAs are not subject to required minimum distributions during the account owner's lifetime. This makes Roth accounts a valuable planning tool for retirees who wish to maintain a pool of tax-free savings, reduce their RMD burden from traditional accounts, and leave a tax-efficient inheritance for beneficiaries. Inherited Roth IRAs are subject to the 10-year distribution rule for non-spouse beneficiaries.[1][2]
Withholding From RMDs
Your IRA custodian or plan administrator is required to withhold 10 percent of RMD distributions for federal income taxes unless you elect otherwise. This withholding can be adjusted up or down by completing a withholding election form. Many retirees choose to increase withholding on RMDs to cover their estimated annual tax liability, which can eliminate the need to make separate quarterly estimated payments.[1]
Conclusion
Required minimum distributions are an unavoidable part of drawing down pre-tax retirement savings, but their tax impact can be managed through thoughtful planning. Strategies such as qualified charitable distributions, Roth conversions in lower-income years, and careful management of withdrawal timing can reduce the overall tax burden of RMDs. Working with a financial advisor or tax professional who specializes in retirement income helps ensure your distribution strategy aligns with your broader income needs and tax goals.[1][2][3]
Sources
[1] IRS Publication 590-B, Distributions from Individual Retirement Arrangements, IRS.gov
[2] IRS, Required Minimum Distributions FAQs, IRS.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions
[3] Fidelity, RMD Rules and Strategies, fidelity.com
