Yes, a required minimum distribution counts as income. Every dollar you withdraw as an RMD from a Traditional IRA, SEP IRA, SIMPLE IRA, or most 401(k) accounts is ordinary income on your federal return, taxed at the same rates as wages. Your custodian reports the distribution on Form 1099-R, and you report it on Form 1040. The one narrow exception is the portion attributable to after-tax (non-deductible) contributions you made to a Traditional IRA: those dollars are your basis and aren’t taxed again. The IRS applies a pro-rata rule, so if $20,000 of a combined $400,000 IRA balance came from non-deductible contributions, 5% of any distribution is tax-free and 95% is ordinary income. Most retirees made fully deductible contributions throughout their careers, which means the entire RMD is taxable.
Because an RMD lands in your adjusted gross income, the real cost usually goes beyond the income tax on the withdrawal itself. The same bump in AGI can pull more of your Social Security benefit into taxable territory and raise your Medicare premiums two years down the road. Those downstream effects are what surprise most retirees.
How an RMD Raises the Tax on Your Social Security
The IRS decides how much of your Social Security benefit is taxable using “provisional income”: your AGI, plus any tax-exempt interest, plus half your Social Security benefits. An RMD feeds straight into AGI, so it can push provisional income past the thresholds that trigger taxation of benefits.
- Below $25,000 (single) or $32,000 (joint): benefits are not taxed.
- $25,000–$34,000 (single) or $32,000–$44,000 (joint): up to 50% of benefits become taxable.
- Above $34,000 (single) or $44,000 (joint): up to 85% of benefits become taxable.
These thresholds were set in the 1980s and 1990s and have never been adjusted for inflation, so they catch more retirees every year. Even a modest RMD can move someone from the 50% band into the 85% band.
How an RMD Raises Your Medicare Premiums
Medicare Part B and Part D premiums are income-tested through the Income-Related Monthly Adjustment Amount (IRMAA). The Social Security Administration looks at your modified adjusted gross income from two years prior, so an RMD taken in 2024 affects your 2026 premiums. The standard Part B premium in 2026 is $202.90 per month. Once your MAGI crosses the first threshold, surcharges stack on top.
The 2026 Part B IRMAA brackets based on 2024 income:
- $109,000 or less (single) / $218,000 or less (joint): no surcharge, standard $202.90.
- $109,001–$137,000 / $218,001–$274,000: $81.20 surcharge, $284.10 per month.
- $137,001–$171,000 / $274,001–$342,000: $202.90 surcharge, $405.80 per month.
- $171,001–$205,000 / $342,001–$410,000: $324.60 surcharge, $527.50 per month.
- $205,001–$499,999 / $410,001–$749,999: $446.30 surcharge, $649.20 per month.
- $500,000+ / $750,000+: $487.00 surcharge, $689.90 per month.
Part D plans carry a separate IRMAA surcharge at the same income brackets, adding another $14.50 to $91.00 per month per person. For a couple, the combined hit can reach several thousand dollars a year.
An RMD itself is not classified as net investment income, so it doesn’t directly trigger the 3.8% Net Investment Income Tax. But by raising MAGI, a large RMD can push other income — dividends, rental income, capital gains — past the NIIT thresholds of $200,000 (single) or $250,000 (joint), which also aren’t indexed for inflation.
Withholding on an RMD Is Usually Too Low
When your custodian processes an RMD, the default federal income tax withholding is 10% of the distribution. That default is often too low. If the RMD lands you in the 22% or 24% bracket, which is common for retirees with Social Security, a pension, and a six-figure IRA, you’ll owe a meaningful balance at filing time and possibly an underpayment penalty.
You can direct your custodian to withhold anywhere from 0% to 100% by submitting Form W-4R. Many retirees set withholding at 15% to 25% to match their actual rate. Quarterly estimated tax payments are the other route.
The Best Way to Cut the Income Hit: A Qualified Charitable Distribution
If you give to charity anyway, a qualified charitable distribution (QCD) is the single most effective tool for keeping an RMD out of your income. A QCD sends money directly from your IRA to a qualifying charity, and the transferred amount is excluded from gross income entirely, not merely deducted on Schedule A. That distinction is what matters: because the money never enters AGI, it doesn’t push up Social Security taxation, IRMAA brackets, or NIIT exposure the way an itemized deduction can’t fix.
You must be at least 70½ on the date of the distribution. The annual limit for 2026 is $111,000 per person, or $222,000 for a married couple where both spouses make QCDs from their own IRAs. The transfer must go directly from your custodian to the charity; if a check passes through your hands first, it’s a regular distribution and fully taxable. QCDs count toward satisfying your RMD, so a retiree whose entire RMD goes to charity has no additional income from it.
QCDs can only come from IRAs, including inherited IRAs. They can’t come from 401(k) or 403(b) plans, so if your retirement savings sit mostly in an employer plan, you’d need to roll funds into a Traditional IRA first.
Accounts That Don’t Create RMD Income
Roth IRAs are exempt from RMDs during the original owner’s lifetime. Because contributions went in after tax, the IRS doesn’t force withdrawals, and the account can keep growing tax-free.
Starting in 2024, designated Roth accounts inside employer plans (Roth 401(k) and Roth 403(b)) are also exempt from RMDs while the owner is alive. Before this change under the SECURE 2.0 Act, these accounts did require distributions. If you have a Roth 401(k) balance, you no longer need to roll it into a Roth IRA just to escape RMDs.
Inherited Accounts: The Income Shifts to the Beneficiary
When someone inherits a Traditional IRA or 401(k), distributions they take are ordinary income to them; the tax obligation transfers with the account. For most non-spouse beneficiaries who inherit from an owner who died after 2019, the SECURE Act’s 10-year rule requires the account to be fully distributed by December 31 of the tenth year after the owner’s death. If the original owner had already begun RMDs before dying, the beneficiary also has to take annual distributions during that 10-year window. Each of those annual withdrawals is ordinary income in the year taken.
The Penalty for Not Taking an RMD
Failing to take the full RMD by the deadline triggers an excise tax of 25% of the shortfall, the amount you should have withdrawn but didn’t. On a $20,000 missed RMD, that’s a $5,000 penalty on top of the regular income tax you’ll owe when you eventually take the distribution.
The penalty drops to 10% if you correct the mistake within the correction window, which generally runs through the end of the second tax year after the year of the miss. Correcting means withdrawing the missed amount and filing Form 5329 with your return.
If the failure was a genuine error — a custodian miscalculation, a serious illness, honestly not knowing — the IRS can waive the penalty entirely. Attach a written explanation to Form 5329 describing what happened and confirming that you’ve already taken the missed distribution. The IRS grants these waivers routinely when the facts show reasonable cause and a quick fix.
State Income Tax on RMDs
Federal treatment of RMDs is uniform, but state treatment varies. Several states have no income tax, so RMDs escape state-level tax entirely. Among states that do tax income, some offer partial or full exclusions for retirement distributions, often tied to age or an income cap. Others tax retirement income the same as any other earnings. Checking your state’s rules before year-end is worth the few minutes, because the combined federal-and-state rate on a large RMD can be meaningfully higher than the federal brackets alone suggest.