Educational only. We explain concepts and help you calculate the required distribution. For tax impact in your situation, consult your CPA.
There's a reason people dread RMD season — and it's not just the calculation. It's the tax question that follows: How much of this will I actually owe?
The short answer is that most RMDs are taxed as ordinary income, the same as wages. But the full picture depends on your account type, your withholding choices, your other income, and a handful of downstream effects that catch people off guard. This page explains how the tax side of RMDs works — what's taxed, what isn't, what gets reported, and what to bring to your CPA.
SimpleRMD helps you calculate the right distribution amount. Your tax professional handles what it means for your return.
In short: Distributions from Traditional, SEP, and SIMPLE IRAs are taxed as ordinary income at your marginal federal rate. Roth IRA distributions are generally tax-free (but inherited Roth IRAs still have distribution requirements). Your custodian reports the distribution to the IRS on Form 1099-R, and you can choose how much federal tax to withhold — or none at all. Beyond the direct tax, RMDs can increase your Medicare premiums, change how your Social Security is taxed, and affect the Net Investment Income Tax. These are questions for your CPA, not a calculator.
On this page
- The Basic Rule: Ordinary Income
- What About Roth Accounts?
- Federal Withholding on RMDs
- State Taxes on RMDs
- Form 1099-R: What Your Custodian Reports
- Downstream Tax Effects You Might Not Expect
- Inherited IRA Tax Treatment
- What to Bring Your CPA
- Common Tax Misunderstandings
- Frequently Asked Questions
The Basic Rule: Ordinary Income
RMDs from tax-deferred accounts — Traditional IRAs, Rollover IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s — are taxed as ordinary income in the year you receive the distribution. They're added to whatever other income you earn that year (Social Security, pensions, part-time work, interest, dividends) and taxed at your marginal rate.
This is the fundamental trade-off behind tax-deferred retirement accounts: contributions reduced your taxable income in the year you made them, and now the IRS collects that tax on the way out.
There's no special capital gains rate for RMDs, regardless of how the money was invested inside the account. Even if your IRA held stocks that appreciated over 30 years, the distribution is ordinary income — not a capital gain.
What the Tax Brackets Look Like
For reference, here are the 2025 federal income tax brackets (for distributions taken in 2025; filed in 2026):
| Federal Rate | Single Filer | Married Filing Jointly |
|---|---|---|
| 10% | Up to $11,925 | Up to $23,850 |
| 12% | $11,926 – $48,475 | $23,851 – $96,950 |
| 22% | $48,476 – $103,350 | $96,951 – $206,700 |
| 24% | $103,351 – $197,300 | $206,701 – $394,600 |
| 32% | $197,301 – $250,525 | $394,601 – $501,050 |
| 35% | $250,526 – $626,350 | $501,051 – $751,600 |
| 37% | Over $626,350 | Over $751,600 |
Brackets are adjusted annually for inflation. For 2026 income (filed in 2027), thresholds increase — for example, the 10% bracket rises to $12,400 for single filers ($24,800 married filing jointly). See IRS.gov for the latest.
Your RMD doesn't have its own rate. It stacks on top of your other income. If your pension and Social Security already put you at $50,000 in taxable income, your RMD starts being taxed at whatever bracket that $50,000 falls in — and may push part of the distribution into a higher bracket. Remember, these are marginal rates — only the income within each bracket is taxed at that rate, not your entire income.
This is why the first-year double-up matters: taking two RMDs in one calendar year concentrates the income and can push you into a higher bracket than you'd otherwise hit.
Source: IRS — Publication 590-B: Distributions from Individual Retirement Arrangements
Related: How much tax will I owe on my RMD? · What is an RMD?
What About Roth Accounts?
Roth IRAs do not require RMDs during the original owner's lifetime, and qualified distributions from a Roth IRA are tax-free. This is the major exception to the "ordinary income" rule above.
Roth 401(k) and Roth 403(b) accounts also no longer require RMDs during your lifetime, thanks to SECURE 2.0 (effective 2024).
However — and this catches people — inherited Roth IRAs do have distribution requirements. The distributions themselves are generally tax-free for the beneficiary, but the 10-year depletion rule still applies. Miss the deadline and the 25% excise tax applies to the amount that should have been distributed, even though no income tax would have been owed on it.
If your retirement accounts include a mix of Roth and Traditional, the tax picture at distribution time depends entirely on which account the money comes from — a planning question for your CPA.
Related: Roth IRA RMD rules · RMD rules by account type
Federal Withholding on RMDs
When you take an RMD, your custodian will ask how much federal income tax you'd like withheld from the distribution. This is not a separate tax — it's a prepayment toward whatever you'll owe on your return, just like paycheck withholding.
The Default Withholding Rate
If you don't specify a withholding preference, the default is typically 10% for IRA distributions. Employer plan distributions (401(k), 403(b)) can default higher — up to 20% for certain rollover-eligible amounts — though RMDs themselves are not rollover-eligible and often follow the 10% IRA norm. Confirm with your custodian, as practices vary.
You can choose:
- A specific percentage (anywhere from 0% to 99% at most custodians)
- A specific dollar amount
- No withholding at all (by filing Form W-4R with your custodian)
Why This Matters
The 10% default doesn't mean your tax rate is 10%. Many RMD recipients are in the 22% or 24% bracket once all income sources are combined. If you withhold only 10% and owe 22%, you'll owe the difference at tax time — potentially with an underpayment penalty if your total withholding and estimated payments fall short.
On the other hand, withholding too much means you're giving the IRS an interest-free loan until you get your refund.
This is a conversation to have with your CPA. They can look at your total income picture and suggest a withholding rate that avoids surprises in either direction.
Source: IRS — Tax Withholding and Estimated Tax (Publication 505) · IRS — Form W-4R
State Taxes on RMDs
Federal taxes are only part of the picture. Most states also tax RMD income, but the rules vary widely.
| State Category | What It Means | Examples |
|---|---|---|
| No state income tax | RMDs aren't taxed at the state level at all | Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming |
| Full taxation | RMDs taxed as ordinary income at regular state rates | California, Minnesota, Vermont, and many others |
| Partial exclusion | Some portion of retirement income is exempt | Several states exempt a fixed dollar amount of retirement income |
| Pension/retirement exemption | Special treatment for certain types of retirement income | Rules vary significantly — some exempt pensions but not IRAs, or vice versa |
State rules change frequently and vary in ways that are hard to generalize. Check your state's department of revenue website for current treatment of retirement income. If you've recently moved — or are considering it — the state tax treatment of your RMDs is worth discussing with your CPA. The difference between states can be significant on a large distribution.
Form 1099-R: What Your Custodian Reports
Every January, your custodian sends you (and the IRS) a Form 1099-R for each retirement account that had a distribution during the prior year. This is the form that documents your RMD for tax purposes.
The Key Boxes
| Box | What It Shows | Why It Matters |
|---|---|---|
| Box 1 | Gross distribution | The total amount distributed from the account |
| Box 2a | Taxable amount | Usually the same as Box 1 for Traditional IRA distributions (the full amount is taxable). May differ if you had basis from nondeductible contributions. |
| Box 4 | Federal income tax withheld | The amount your custodian withheld and sent to the IRS on your behalf |
| Box 7 | Distribution code | Tells the IRS the type of distribution. Code 7 is the most common for normal RMDs (age 73+). Code 4 indicates a distribution to a beneficiary after the account owner's death. |
| Box 14 | State tax withheld | If your state withheld income tax from the distribution |
If you made nondeductible contributions to your Traditional IRA over the years — meaning you contributed after-tax money — a portion of your RMD is a return of that basis and is not taxable. This is tracked on IRS Form 8606. If you're not sure whether you have basis in your IRA, your CPA can help determine this. It's one of the most commonly overlooked items in IRA tax reporting.
Source: IRS — About Form 1099-R
Related: How RMDs work · What information do I need for my RMD?
Downstream Tax Effects You Might Not Expect
This is where RMD taxes get genuinely complex — and where most people benefit from professional guidance. Your RMD doesn't just affect the tax on the distribution itself. It can change the tax treatment of other things.
Flowchart showing how an RMD increases adjusted gross income, which can trigger higher Social Security taxation, Medicare IRMAA surcharges, and the Net Investment Income Tax
Social Security Taxation
Up to 85% of your Social Security benefits can be taxable, depending on your "combined income" (adjusted gross income + nontaxable interest + half of Social Security). RMD income counts toward that calculation. A large RMD can push you past the thresholds that cause more of your Social Security to be taxed.
Medicare IRMAA Surcharges
Medicare Part B and Part D premiums are income-adjusted. If your modified adjusted gross income (MAGI) exceeds certain thresholds, you pay a surcharge called IRMAA (Income-Related Monthly Adjustment Amount). RMD income counts toward MAGI — and the look-back is two years. A large distribution in 2025 can affect your Medicare premiums in 2027.
Net Investment Income Tax (NIIT)
The 3.8% NIIT applies to individuals with MAGI above $200,000 ($250,000 married filing jointly). While RMD income itself isn't subject to NIIT, a large RMD can push your MAGI above the threshold — making your investment income (dividends, capital gains, rental income) subject to the surtax.
Example: How It Compounds
Robert, age 76, is a single filer. His income before RMDs: $42,000 in Social Security benefits, $8,000 in interest and dividends. His Traditional IRA RMD is $24,000.
With the $24,000 RMD added, Robert's AGI rises enough that a larger share of his Social Security becomes taxable, his total income may push into a higher bracket, and his Medicare premiums two years out could increase.
This example is illustrative — actual impact depends on Robert's full return, deductions, and filing status. Use tax software or a CPA for precision.
The exact numbers depend on Robert's full tax situation — which is why this is a CPA conversation. SimpleRMD calculates the distribution amount. Your tax professional calculates the impact.
Source: IRS — Are My Social Security Benefits Taxable? · Medicare.gov — IRMAA
Inherited IRA Tax Treatment
If you inherited a Traditional IRA, distributions are taxed as ordinary income to you — the same treatment the original owner would have faced. The money you receive is added to your own income for the year and taxed at your marginal rate. Unlike inherited property or brokerage accounts, there is no step-up in basis — the full distribution is taxable as ordinary income.
If you inherited a Roth IRA, distributions are generally tax-free, assuming the account met the five-year aging requirement before the original owner's death. (Most inherited Roth IRAs do meet this requirement.)
What This Means for the 10-Year Rule
Under the 10-year rule, the full account must be emptied within 10 years. For inherited Traditional IRAs, this means all of that money will be taxable as ordinary income over those 10 years. When within those 10 years you take the distributions is where it gets interesting — and where a CPA can help you understand the options.
If annual distributions are required (because the original owner had started their own RMDs), those minimum amounts are set by IRS tables. But nothing prevents you from taking more than the minimum in a given year.
For inherited Roth IRAs, the 10-year rule still applies, but the distributions are tax-free. The main concern there is the excise tax penalty for not emptying the account on time — not income tax.
The Emotional Layer
Inherited IRA taxes can feel especially frustrating. You're managing an account you didn't choose, following rules that changed after you inherited it, and paying taxes on money someone else saved. If you're in this situation, be patient with yourself. The rules are genuinely complex, and getting professional guidance isn't a luxury — it's practical.
Related: Tax on inherited IRA RMDs · Inherited IRA RMD rules · The 10-year rule explained
What to Bring Your CPA
SimpleRMD can generate a CPA-ready PDF report that summarizes your accounts, balances, and calculated RMDs. But for the tax conversation, your CPA will likely want a broader view:
Documents:
- Form 1099-R from each custodian (received in January)
- Prior-year tax return
- Social Security benefit statement (Form SSA-1099)
- Form 8606 history (if you've ever made nondeductible IRA contributions)
- SimpleRMD export showing account balances, calculated RMDs, and distribution dates
Questions worth asking:
- "Am I withholding the right amount from my RMDs?"
- "Is my RMD income pushing more of my Social Security into taxation?"
- "Will this year's income trigger an IRMAA surcharge in two years?"
- "Do I have any nondeductible basis in my IRA?"
- "Am I filing the right forms for my inherited IRA distributions?"
You don't need to understand every downstream effect yourself. You need to bring the right information so your CPA can.
See how SimpleRMD's CPA export works →
Common Tax Misunderstandings
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"My RMD is taxed at the capital gains rate." It isn't. Regardless of what's inside the account — stocks, bonds, mutual funds — distributions from tax-deferred accounts are ordinary income. Capital gains rates only apply to assets held in taxable accounts.
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"The 10% default withholding means I'm in the 10% bracket." The withholding rate and your tax rate are different things. The 10% default is just a prepayment. Your actual rate depends on all your income combined. Many retirees owe significantly more than what was withheld.
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"Roth means no rules." Roth IRAs have no RMDs during the owner's lifetime and distributions are tax-free. But inherited Roth IRAs still must follow the 10-year rule, and the excise tax penalty applies if you don't empty the account on time.
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"I don't owe state taxes on my RMD." Maybe, depending on your state. Nine states have no income tax, and some others offer partial exemptions. But most states do tax RMD income. This is worth verifying — especially if you've moved recently.
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"My custodian handles the tax part." Your custodian withholds taxes (if you ask them to) and sends you a 1099-R. They do not calculate your total tax liability, adjust your withholding for downstream effects, or file your return. That's your responsibility — or your CPA's.
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"I had nondeductible contributions, so my whole RMD is partly tax-free." If you have basis in your IRA from nondeductible contributions, a portion of each distribution is indeed a tax-free return of that basis. But the calculation is pro-rated across all your Traditional IRAs combined — not just the one you contributed to. Form 8606 tracks this and should be filed each year you take a distribution from an IRA with basis. If you're not sure, ask your CPA before assuming.
Frequently Asked Questions
Are RMDs taxed as ordinary income?
Yes. Distributions from Traditional, SEP, SIMPLE, and Rollover IRAs, as well as 401(k)s and 403(b)s, are taxed as ordinary income in the year you receive them. There is no special rate for RMDs. How much will I owe? →
Can I choose how much tax is withheld from my RMD?
Yes. When you request a distribution, you can specify a withholding percentage or dollar amount, or elect no withholding by filing Form W-4R with your custodian. The default for IRA distributions is typically 10%, but this may not match your actual tax rate. Talk to your CPA about the right amount.
Are inherited IRA distributions taxable?
Inherited Traditional IRA distributions are taxed as ordinary income to the beneficiary. Inherited Roth IRA distributions are generally tax-free. In both cases, the distribution rules and deadlines still apply — and the excise tax penalty applies if you miss them. Full inherited IRA tax details →
Do RMDs affect my Medicare premiums?
They can. Medicare Part B and Part D premiums are based on your MAGI from two years prior. A large RMD in 2025 could increase your premiums in 2027 through the IRMAA surcharge system. This is one of the most common "hidden" effects of RMDs.
Do I owe estimated taxes on my RMD?
If the tax withheld from your RMDs (and other income) doesn't cover your total liability, you may owe estimated taxes — and potentially an underpayment penalty. Many retirees avoid this by increasing their RMD withholding rate rather than making separate quarterly payments. Your CPA can advise on which approach works best for your situation.
What if I have nondeductible IRA contributions?
If you contributed after-tax money to a Traditional IRA (nondeductible contributions), you have "basis" in the account. A pro-rated portion of each distribution is a tax-free return of that basis. This is calculated on Form 8606 and must be tracked across all your Traditional IRAs combined. If you're not sure whether you have basis, check old tax returns for Form 8606 filings — or ask your CPA.
Can taking a larger RMD put me in a higher tax bracket?
It can push part of your income into a higher bracket, yes — but only the portion that crosses into that bracket is taxed at the higher rate. This is how the progressive tax system works: if your RMD pushes $3,000 into the 24% bracket, only that $3,000 is taxed at 24%, not your entire income. The question of whether to take more or less than the minimum in a given year is a planning conversation for your CPA. SimpleRMD calculates the required amount; it does not recommend distribution strategies.
Know your number. Let your CPA handle the rest.
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- Export a CPA-ready report with your calculated RMDs →
- RMD rules by account type →
This article is for informational purposes only and does not constitute tax, legal, or financial advice. IRS rules and tax laws are subject to change. Consult a qualified tax professional or financial advisor for guidance specific to your situation. SimpleRMD is a calculation and tracking tool — not a financial advisory service.
Sources: IRS.gov (Publication 590-B, Publication 505, About Form 1099-R, Form 8606 Instructions, Social Security Benefits Taxation). IRS Revenue Procedure 2024-40 (2025 tax brackets). IRS Notice 2025-67 (2026 inflation adjustments). Medicare.gov IRMAA guidance. SECURE 2.0 Act of 2022 (Pub. L. 117-328). Rules confirmed current as of February 2026.