If you search for how to avoid taxes on RMD withdrawals, you’ll find plenty of confident promises. Here’s the plain version. You generally can’t skip a required minimum distribution, and the money that comes out is usually taxed as ordinary income. However, you can plan around it. A handful of legal moves can reduce the taxable amount, spread it over more years, or keep it from triggering other costs, such as higher Medicare premiums.
This article explains RMD taxes and strategies to reduce them under the 2026 federal rules. It’s about the tax bill, not the payment schedule. If you’re deciding whether to take your RMD monthly or all at once, we cover that in a separate post.
What Is an RMD?
A Required Minimum Distribution (RMD) is the minimum amount you must withdraw each year from certain tax-deferred retirement accounts once you reach the applicable IRS age. For people born in 1951–1959, that age is 73; it is 75 for those born in 1960 or later. Some employees can delay RMDs from their current employer’s plan until retirement, but that exception does not apply to IRAs or generally to owners of more than 5% of the business.
Distributions from qualified retirement accounts are generally taxed as ordinary income, making RMDs a taxable event. Note, RMDs generally apply to accounts that had been funded with pre-tax dollars such as a Traditional IRA or 401(k). Roth IRAs have never had lifetime RMDs, and starting in 2024, Roth accounts within workplace plans follow the same rule.
Missing one is costly. The IRS can assess a 25% excise tax on the amount you should have withdrawn, or 10% if you correct the mistake within two years.
How Are RMDs Taxed? Understanding the RMD Tax Rate
RMDs will likely be taxed as ordinary income. However, if there have ever been non-deductible contributions made to the account, this basis would not be taxed, but all earnings would be taxable. It is worth noting that if there is a non-deductible basis within the account, any distributions made will come out “Pro-rata”, meaning a mix of pre-tax contributions, non-deductible basis, and earnings will be distributed. The non-deductible basis cannot be isolated and used for any type of distribution on its own. It will always come out as a mix.
Say your IRA holds $1 million at year-end. At age 73, the IRS life expectancy divisor is 26.5, setting the first RMD at about $37,700. If the account keeps growing while the divisor shrinks, required withdrawals usually climb.
Qualified Charitable Distributions: The Closest Thing to a True Exclusion
If you already give to charity, a qualified charitable distribution (QCD) is the most direct way to reduce taxes on RMD distributions. You must be at least 70½, and the money goes directly from your IRA to a qualified charity. That gift can satisfy all or part of your RMD, and it never appears in your adjusted gross income (AGI).
For 2026, the limit is $111,000 per person. A married couple can each give that much, as long as each spouse gives from their own IRA.
Unlike a regular donation, a QCD lowers your AGI even if you don’t itemize.
The 70½ age is separate from the RMD age, so QCDs can start before RMDs do. Anything above the annual limit is taxable, and unused room doesn’t carry over. QCDs come from IRAs, not 401(k)s, so a rollover may need to come first.
Roth Conversions and Strategic Withdrawals Before RMD Age
The cleanest way to shrink future RMDs is to have less money in the account that creates them.
A Roth conversion transfers funds from a traditional IRA to a Roth IRA. You pay ordinary income tax on the taxable portion converted that year; after-tax basis is accounted for under the applicable rules. In exchange, that money leaves the RMD pool permanently, and qualified Roth withdrawals aren’t taxed later.
Timing matters. The years between retirement and RMD age can be unusually low-income years, especially if you retire before starting Social Security. Planners often treat this stretch as the best window for conversions. Converting before you claim Social Security also helps, since Roth withdrawals don’t count toward the formula that determines how much of your benefit is taxed.
Strategic withdrawals work the same way without the Roth. You draw down some of the traditional IRA earlier, up to the top of a bracket you’re comfortable with. Once you’re past 59½, there’s no 10% additional tax on early withdrawals, and paying 12% now may beat paying 24% later.
Conversions come with costs. The converted amount increases your income that year, which affects your Medicare premiums two years later. It can also push you into a higher bracket and reduce the new $6,000 senior deduction.
Should I Have Taxes Withheld From My RMD?
For most people, some tax should come out, through withholding or quarterly estimated payments. Payers withhold 10% of a nonperiodic distribution by default unless you choose another rate, and Form W-4R lets you choose anything from 0% to 100%.
The default may not be enough. If your top bracket is higher than 10%, you could owe the difference in April, plus an underpayment penalty. To avoid an underpayment penalty, timely payments generally must cover at least 90% of this year’s tax or 100% of last year’s, whichever is less. The prior-year threshold is 110% if prior-year AGI exceeded $150,000, or $75,000 if married filing separately.
Withholding has one unusual advantage. You’re treated as having paid it evenly throughout the year, regardless of when it came out, which estimated payments don’t get. So if you realize in November that you’re behind, a larger withholding on a December distribution can fix the shortfall. Withholding doesn’t reduce your income, though. It only changes when the IRS gets paid.
Getting the First Year Right
Your first RMD is for the year you turn 73, but you can delay it until April 1 of the following year. The catch is that your second RMD is still due by December 31 of that same year, and two RMDs in one tax year can push you into a higher bracket.
Say you turn 73 in 2026. Take both RMDs in 2027, and that return carries two years of distributions. That might be fine if your income is low that year. If not, taking the first one by December 31, 2026, splits the income across two returns.
Effects on Social Security Taxes and Medicare IRMAA
RMDs won’t change the size of your Social Security benefit, but they can affect how much of it is taxable. The federal formula starts with provisional income: your AGI before including Social Security benefits, plus tax-exempt interest, plus half of your benefits, with certain other adjustments when applicable. For single filers, up to 50% of benefits can be taxed once that number exceeds $25,000, and up to 85% once it exceeds $34,000. For joint filers, the thresholds are $32,000 and $44,000. These thresholds have never been adjusted for inflation.
In the phase-in zone, each extra dollar of income can make up to 85 cents of benefits taxable, and you also pay tax on that extra dollar. Your effective rate there can run well above your bracket.
The income-related monthly adjustment amount, or IRMAA, is a surcharge on Part B and Part D premiums for higher earners. For 2026, the standard Part B premium is $202.90 a month, and surcharges begin when income on your 2024 return exceeds $109,000 for single filers or $218,000 for joint filers. Because of that two-year lookback, your 2026 income sets your 2028 premiums.
The tiers are cliffs. Cross a threshold by a single dollar, and the corresponding monthly surcharge generally applies for the premium year, unless an adjustment or another exception applies. With a surcharge, total Part B premiums range from $284.10 to $689.90 a month.
The income measure is AGI plus tax-exempt interest. QCDs reduce it. Large RMDs and Roth conversions increase it. If your income drops due to a life-changing event such as retirement, divorce, or the death of a spouse, you can appeal using Form SSA-44. Higher income also erodes the senior deduction, which phases out above $75,000 for single filers and $150,000 for joint filers and applies only for tax years 2025 through 2028.
QLACs: Delaying Part of the Problem
A qualifying longevity annuity contract (QLAC) is a deferred income annuity you buy with funds from a traditional IRA or workplace plan. The premium is excluded from the balance used to calculate your RMD until payments begin. For 2026, you can contribute up to $210,000. The old cap tied to your account balance no longer applies to contracts purchased after December 28, 2022, and payments must begin by the first of the month after your 85th birthday.
With a $1 million IRA, a $210,000 QLAC leaves $790,000 in the RMD calculation. Using the age 73 divisor of 26.5, the first RMD drops by roughly $7,900. When the annuity starts paying, those payments are taxed as ordinary income. A QLAC delays part of the tax. It doesn’t erase it.
The tradeoffs are real. You give up access to that money and count on an insurer to pay decades from now, so a QLAC tends to fit people with plenty of other assets. As a fee-only firm, we don’t earn commissions on the products we recommend, so we can view a QLAC as one tool among several, not something to sell.
How to Reduce RMD Taxes After 73
After RMDs begin, you can still make QCDs, convert amounts above the RMD to a Roth to help manage future RMDs, or use a QLAC if there are enough pretax assets. Proper asset location strategies can also help reduce future taxes associated with RMDs.
These tools work best together, and the right mix depends on your balances, other income, giving, health, and heirs. A hypothetical couple in their late 60s might convert a slice each year while staying under a Medicare surcharge line, start QCDs at 70½, and set withholding so April holds no surprises. Someone else’s RMD strategies would look different, and that’s the point.
Build Your RMD and Tax Strategy With Professionals
RMDs sit at the intersection of your investments, taxes, Medicare, and Social Security. Changing one piece moves the others.
ARQ Wealth is a fee-only fiduciary firm in Scottsdale, Arizona. Clients pay us for advice rather than commissions, so we focus on your goals rather than what we can sell. If you’d like to see how your numbers play out, we work alongside your tax professional to build a plan for RMDs, giving, conversions, and Medicare costs. Learn more about our tax planning approach or request a meeting to start the conversation.
This article is for general education and isn’t tax, legal, or investment advice. Tax rules and dollar limits change, and your situation is your own. Talk with a qualified financial and tax professional before acting.