RMD Taxes and Withholding: What Your Required Distribution Really Costs

The required minimum distribution is usually discussed as a withdrawal problem: how much, from which account, by when. For most retirees it is really a tax problem. The money comes out of a pre-tax account, so every dollar is ordinary income. It arrives whether you need it or not. And it lands on top of Social Security, a pension and any other income, so it is taxed at the highest rates you pay.

A single retiree with $40,000 of taxable income who takes the $37,736 RMD on a $1 million IRA at 73 owes $7,262 more in federal tax. That is an effective 19.2% on the distribution, and it moves them from the 12% bracket into the 22%. If they let the custodian withhold the default 10%, $3,774 is withheld and $3,488 is still owed in April.

This article puts numbers on the federal tax at several income levels, explains how withholding and estimated payments work for RMDs, and covers the three side effects that make the true marginal rate higher than the bracket suggests. The step-by-step article covers the calculation itself, and the RMD amounts article shows how large the distribution becomes over time.

A note before you start. This is general education, not tax advice. Federal tax figures are computed by this site's federal tax engine from the 2026 brackets in IRS Revenue Procedure 2025-32. They are expressed against taxable income, the figure after every deduction, including the additional deductions for taxpayers 65 and older, and after the taxable share of Social Security. Expressing them that way keeps the tables accurate whatever your deductions are, but it means you need your own taxable income to read them. RMD amounts come from this site's RMD engine. Withholding rules are summarised from IRS Publication 505 and Form W-4R. State tax is covered separately.

1. Why an RMD is taxed at your highest rate

Money in a traditional IRA, 401(k), 403(b) or 457(b) went in before tax, or grew without tax, so it is taxed as ordinary income when it comes out. There is no capital-gains rate on it, whatever the account held. A stock that tripled inside an IRA is taxed at your income rate when the proceeds are distributed, not at 15%.

The RMD is also the last income to arrive in the stack. Social Security, a pension, interest and dividends are there regardless. The RMD is added on top, so it fills whatever bracket room is left and then spills into the next one. That is why the effective rate on the distribution is usually higher than your overall average rate, and why the marginal rate, the rate on the last dollar, is the one that matters.

A larger RMD is not a reason to panic, and it is not a penalty. The tax was deferred, often for decades, and some of it is simply coming due. The planning question is whether it comes due at a lower rate than it otherwise would.

2. What an RMD costs a single filer

Additional federal income tax caused by the RMD, at four levels of taxable income before it. The four RMD amounts are the 73-year-old's requirement on balances of roughly $530,000, $1 million, $1.5 million and $2 million.

The percentage is the effective federal rate on the RMD itself.

Three things to notice. First, the rate on the RMD rises with both its size and your other income, because each pushes the distribution further up the schedule. Second, the jump from the 12% to the 22% bracket at $50,400 of taxable income is the big one: a single filer with $40,000 already in the stack has only $10,400 of room left at 12%, so most of any sizeable RMD is taxed at 22%. Third, at $90,000 of other income every RMD crosses into the 24% bracket at $105,700.

3. What an RMD costs a married couple

The same RMD amounts, filing jointly, where every bracket boundary is twice as wide:

A couple has much more room at 12%, up to $100,800 of taxable income, so a modest RMD on top of a modest income can be taxed entirely at 12%. At $40,000 of other income, even a $56,604 RMD stays in that bracket.

This is also why the death of a spouse often raises the tax on the same RMD. The survivor inherits the accounts, so the RMD is roughly unchanged, but files as a single taxpayer from the year after the death with brackets half as wide. An RMD that was taxed at 12% on a joint return can be taxed largely at 22% on a single one. It is one of the strongest arguments for drawing down or converting pre-tax balances while both spouses are alive.

4. Withholding: the default and why it usually falls short

Custodians withhold federal tax from RMDs unless you tell them otherwise, and the default is rarely the right amount.

From an IRA, the default is 10%. An IRA distribution you can take on demand is a "nonperiodic payment" for withholding purposes, and the custodian withholds 10% unless you file Form W-4R choosing a different rate, anywhere from 0% to 100%. If you set up regular scheduled payments instead, they may be treated as periodic payments withheld like wages under Form W-4P.

From a 401(k) or other employer plan, the RMD is not subject to the mandatory 20% withholding that applies to most plan distributions, because an RMD cannot be rolled over. It is withheld under the same 10% default or periodic rules as an IRA distribution. Any amount you take above the RMD can be subject to the 20% rule.

Ten percent is too little for most RMDs. The tables above show effective rates of 12% to 24% on the distribution. On the opening example:

To cover the tax through withholding alone, this retiree would choose about 20% on Form W-4R, which withholds $7,547. The rate to choose is the effective rate from the tables, rounded up, not your marginal bracket. Withholding at the marginal rate over-withholds on the part of the RMD that falls in a lower bracket.

State withholding varies. Some states require withholding whenever federal tax is withheld, some allow you to opt out, and several have no income tax at all. Your custodian's form will show the options for your state.

5. Paying the bill without an underpayment penalty

The IRS expects tax to be paid through the year, by withholding or quarterly estimated payments. Underpay and a penalty accrues, at the federal short-term rate plus three points, from each quarterly due date until the shortfall is paid.

You avoid it entirely if what you have paid through the year reaches either safe harbor:

• 90% of this year's tax, or
• 100% of last year's tax, or 110% if last year's adjusted gross income was over $150,000 ($75,000 married filing separately).

The prior-year safe harbor is the useful one in retirement. It is a known number, so a retiree whose income is stable can withhold or pay exactly that and owe nothing more than the balance in April, with no penalty, whatever this year's RMD turns out to be.

Withholding has one large advantage over estimated payments. For penalty purposes, federal withholding is treated as if it were paid evenly through the year, regardless of when it was actually withheld. Estimated payments count only from the date you make them.

That makes a December strategy possible. Take the whole year's RMD in December and have enough withheld from it to cover the year's entire tax, including tax on Social Security, a pension and investment income. The IRS treats that withholding as having been paid in four equal instalments, so no penalty accrues, and you have kept the money invested for eleven more months. The only risk is leaving it too late: if the custodian cannot process the distribution before December 31, the RMD is missed.

If you prefer estimated payments, they are due April 15, June 15, September 15 and January 15 of the following year. A large RMD taken in, say, October can be covered by an increased payment on September 15 or January 15, but a payment made after the quarter in which the income arrived leaves a small penalty for the earlier quarters.

6. Why the true marginal rate is higher than the bracket

The bracket tables in sections 2 and 3 are the federal income tax on the distribution in isolation. Three other rules respond to the same extra income, and together they make the real cost of an RMD higher than the bracket suggests.

More of your Social Security becomes taxable. Up to 85% of Social Security benefits are taxable once "provisional income" (adjusted gross income plus half of your benefits plus any tax-exempt interest) passes $25,000 for a single filer or $32,000 for a couple, and the higher tier begins at $34,000 and $44,000. Those thresholds have never been indexed for inflation. In the range where benefits are being phased into tax, each extra dollar of RMD can make up to 85 cents of Social Security taxable as well. A retiree in the 22% bracket in that range pays tax on $1.85 for each $1 of RMD, an effective marginal rate of about 40.7%, until 85% of their benefits are taxable and the effect stops.

Medicare premiums rise two years later. Part B and Part D premiums carry income-related surcharges, called IRMAA, set by your modified adjusted gross income from two years earlier. The 2026 RMD sets the 2028 premiums. The tiers are cliffs: one dollar over a threshold adds the full surcharge for the whole year, for each spouse on Medicare. The thresholds change annually, so check the current table before sizing any discretionary distribution near one.

The temporary senior deduction shrinks. For 2025 through 2028, taxpayers 65 and older may deduct up to an extra $6,000 each, reduced as modified adjusted gross income rises above $75,000 for a single filer or $150,000 for a couple. In the range where it phases out, each extra dollar of income removes six cents of deduction, which adds a little over one percentage point to the marginal rate for someone in the 22% bracket.

None of these appear in the bracket tables, which is why the tables are best read as the floor on what an RMD costs.

7. Ways to lower the tax

The RMD itself cannot be avoided once it is required, but the tax on it can be shaped.

Give from the IRA instead of from your checking account. A qualified charitable distribution (QCD) sends money directly from an IRA to a charity. It counts toward the year's RMD, and it is excluded from income entirely, which is better than a deduction because it never raises adjusted gross income at all, so it does not trigger the Social Security, Medicare or senior-deduction effects in section 6. You must be 70½ or older, the money must go straight from the IRA custodian to the charity, donor-advised funds do not qualify, and there is an annual limit indexed to inflation ($108,000 for 2025). QCDs are not available from 401(k)s, so roll employer-plan money into an IRA first if you intend to give this way.

Shrink the balance before RMDs begin. Every dollar withdrawn or converted to Roth before your RMD start age, in years when your income is low, is a dollar that will never be forced out later at a higher rate. The years between retirement and the start of RMDs, which SECURE 2.0 extended to 75 for anyone born in 1960 or later, are the window for it.

Choose which account the RMD comes from. IRA RMDs can be taken from whichever IRA you choose. That does not change the tax, but it lets you sell what you most want to own less of, and the RMD then doubles as your annual rebalancing.

Mind the year. Two RMDs in one year, the result of delaying the first one to April 1, is the most avoidable tax spike in retirement. The step-by-step article shows the cost.

What does not work: taking the RMD in shares rather than cash, which is allowed but taxed exactly the same on their value; moving money between IRAs; or holding cash inside the IRA to slow its growth, which lowers the tax only by lowering the return.

8. The state layer

Most states tax RMDs as ordinary income at their own rates, but the treatment varies more than for almost any other kind of income. Several states have no income tax. Some exclude all retirement-plan distributions, some exclude them only above a certain age, and some exclude a fixed amount per person per year.

That variation is large enough to change the arithmetic in this article. The same $37,736 RMD can cost nothing in state tax in one state and well over $1,000 in another. The article on RMDs and state tax covers the rules state by state, and the retirement tax by state calculator computes what your state takes from a given distribution.

9. A checklist for this year's RMD

1. Work out the amount, account by account, from last December 31's balances.
2. Estimate your taxable income without it, and read the effective rate on the RMD from the tables in sections 2 and 3.
3. Check the side effects: are you in the range where Social Security is being phased into tax, near a Medicare surcharge threshold, or in the senior-deduction phase-out?
4. If you give to charity, route the gift through a QCD before taking the rest of the RMD.
5. Set withholding on Form W-4R at the effective rate rounded up, not the 10% default, or plan estimated payments to reach a safe harbor.
6. Take it in time. If you take the whole RMD in December to use the withholding rule, request it early enough for the custodian to process it before December 31.

Frequently asked questions

Are RMDs taxed as ordinary income? Yes. Distributions from traditional IRAs, 401(k)s, 403(b)s and 457(b)s are ordinary income, taxed at your regular federal rates and by most states, whatever the account invested in. There is no capital-gains rate on them.

How much tax will I pay on my RMD? It depends on your other income. A single filer with $40,000 of taxable income pays $7,262 of additional federal tax on a $37,736 RMD, an effective 19.2%. A couple with $40,000 pays $4,528 on the same RMD, all at 12%. The tables in sections 2 and 3 cover other cases.

How much should I withhold from my RMD? Enough to cover the tax it adds, which is usually more than the 10% default. Use the effective rate from the tables for your income and filing status, rounded up, and choose it on Form W-4R. For the single filer above, about 20%.

Is federal tax withheld from RMDs automatically? From an IRA, 10% is withheld unless you choose otherwise on Form W-4R, which can set any rate from 0% to 100%. RMDs from a 401(k) are not subject to the mandatory 20% withholding that applies to other plan distributions.

Can I avoid estimated tax payments by withholding from my RMD? Yes. Federal withholding is treated as paid evenly through the year, even if it all happens in December. A single December RMD with enough withheld to cover the whole year's tax avoids underpayment penalties.

Does my RMD make my Social Security taxable? It can. An RMD raises the provisional income that decides how much of your Social Security is taxable, up to 85%. In that range each extra dollar of RMD can make up to 85 cents of benefits taxable too.

Does an RMD affect Medicare premiums? Yes, two years later. Medicare Part B and D surcharges are based on modified adjusted gross income from two years earlier, so a large RMD this year can raise premiums in two years' time.

How can I reduce the tax on my RMD? Give to charity through qualified charitable distributions from an IRA, which count toward the RMD and are not taxed; draw down or convert pre-tax balances in low-income years before RMDs begin; and avoid delaying the first RMD into a year that already has one.

Are RMDs taxed by my state? Most states tax them, but several have no income tax and others exclude some or all retirement-plan distributions, often depending on age. The state article and calculator linked in section 8 show your state's treatment.

What to do next

Start with the amount: the RMD calculator gives this year's figure for each account. Then estimate your taxable income without it and read the federal cost from the tables above, and use the retirement tax by state calculator for your state's share. If the combined rate surprises you, the long-run question is whether converting some of the balance in lower-income years would leave you ahead; the Roth vs. Traditional calculator answers it on your own rates.

Every figure on this site is sourced and dated. How we source every number.

Federal tax figures in this article are computed by this site's federal tax engine from the 2026 brackets in IRS Revenue Procedure 2025-32, expressed as the additional tax on the RMD at a stated taxable income after all deductions; RMD amounts come from its RMD engine and the IRS Uniform Lifetime Table in Publication 590-B. Withholding and estimated-tax rules are summarised from IRS Publication 505. The taxation of Social Security, Medicare premium surcharges and the temporary senior deduction are described but not computed, and their thresholds should be checked for the current year. State tax is covered separately. This is general education and not tax advice; for your own situation consult a licensed tax professional.