You can reduce or eliminate the tax on required minimum distributions by moving money out of the taxable pipeline before it becomes an RMD or by routing the RMD itself somewhere the IRS doesn’t tax. The three tools that do the most work are qualified charitable distributions, multi-year Roth conversions, and qualified longevity annuity contracts. Timing matters as much as the tools: acting in the years before RMDs begin, and in the low-income years between retirement and age 73, is where most of the savings live. Here is how to avoid taxes on RMDs using each approach, and where the boundaries are.
Send the Money Straight to Charity With a QCD
A qualified charitable distribution moves money directly from your IRA to a qualifying charity, and the amount never appears in your taxable income. It counts toward your RMD for the year. Because a QCD reduces your adjusted gross income dollar for dollar, it beats taking the distribution, paying tax on it, and then donating, and it works whether or not you itemize.1Internal Revenue Service. Seniors Can Reduce Their Tax Burden by Donating to Charity Through Their IRA
You have to be at least 70½ on the date of the transfer. That’s lower than the RMD starting age of 73, so you can begin drawing the balance down tax-free several years before RMDs kick in. For 2026 the annual QCD limit is $111,000 per person, or $222,000 for a married couple where each spouse directs distributions from their own IRA. Amounts above the limit are taxed like a normal distribution.1Internal Revenue Service. Seniors Can Reduce Their Tax Burden by Donating to Charity Through Their IRA
Two boundaries catch people off guard. The transfer has to go directly from your IRA custodian to a 501(c)(3) public charity; private foundations, donor-advised funds, and supporting organizations don’t qualify. And QCDs can only come from IRAs, not from a 401(k) or 403(b). If your money is in an employer plan, you’d need to roll it into a Traditional IRA first, which raises its own timing issue if you’re past RMD age and still working (see below).1Internal Revenue Service. Seniors Can Reduce Their Tax Burden by Donating to Charity Through Their IRA
Shrink the Pre-Tax Balance With Roth Conversions
If charitable giving won’t absorb the full RMD, the strongest long-term move is converting Traditional IRA or 401(k) money to a Roth IRA. Roth IRAs aren’t subject to RMDs during the original owner’s lifetime, and designated Roth accounts inside 401(k)s and 403(b)s are also now exempt from lifetime RMDs.2Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs) Every dollar you convert is a dollar the IRS will never force out.
You pay ordinary income tax on the converted amount in the year of conversion. The bet is that paying a known rate now beats paying an unknown rate later on a larger balance. That bet works best in years your income is unusually low, like the window between retiring and starting Social Security, or between Social Security and age 73.
Bracket-Filling Year by Year
Converting a big balance in a single year is usually a mistake. A $500,000 conversion piled on other income can push you into the 32% or 35% bracket and eat much of the benefit. Spread over five to ten years in smaller amounts, the same conversion might happen entirely in the 22% or 24% bracket.
The practical rule: convert just enough each year to fill your current bracket without spilling into the next. For 2026, the 12% bracket for joint filers ends at $24,800, the 22% bracket ends at $100,800, and the 24% bracket ends at $211,400.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 If your taxable income from pensions and other sources is $60,000, you could convert roughly $40,800 and stay inside the 22% bracket. Do that annually for a decade and the pre-tax balance the IRS eventually forces you to draw from is dramatically smaller.
The Five-Year Rule Boundary
Most retirees converting are already past 59½, which keeps this simple. Qualified Roth distributions are fully tax-free and penalty-free once the account has been open five tax years (counting from January 1 of the year you first funded any Roth IRA) and you’re at least 59½. A separate five-year clock applies to each conversion for the 10% early withdrawal penalty, but for anyone 59½ or older, that clock is irrelevant because the age exception removes the penalty.4Internal Revenue Service. Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)
Park Money in a QLAC to Reduce the RMD Base
A qualified longevity annuity contract lets you move part of your retirement account into a deferred annuity whose value is excluded from the balance used to calculate your annual RMD until payments begin. That directly reduces what you’re forced to withdraw each year.5Internal Revenue Service. Instructions for Form 1098-Q (04/2025)
For 2026 you can put up to $210,000 into a QLAC across all your eligible retirement accounts. SECURE 2.0 eliminated the old 25%-of-balance cap.6Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living Payments must begin no later than the first day of the month after you turn 85.5Internal Revenue Service. Instructions for Form 1098-Q (04/2025)
A QLAC doesn’t erase the tax; it postpones and restructures it. Payments are ordinary income when they start. The appeal is that a $210,000 QLAC bought at 72 shrinks the RMD base for every year between purchase and payout. The trade-off is illiquidity: that money is locked up until payments begin, and what happens if you die before then depends on the contract terms.
Delay Employer Plan RMDs by Staying on the Job
If you’re still employed past 73 and don’t own 5% or more of the company, you can postpone RMDs from your current employer’s plan until April 1 of the year after you actually retire. This still-working exception covers 401(k), 403(b), and other workplace plans sponsored by the employer you’re currently working for.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
It doesn’t cover IRAs. RMDs from every Traditional IRA, SEP IRA, and SIMPLE IRA you own are still required, even at 75 while working. It also doesn’t cover plans left with former employers; those follow the normal RMD rules.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
One trap to avoid: rolling an old 401(k) into a Traditional IRA while you’re past RMD age kills the still-working exception on that money and forces RMDs to start immediately. Rolling into your current employer’s plan (if it accepts rollovers) can preserve the exception. And you can’t roll over an amount that represents an RMD; the RMD has to come out first.8Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
Turn Employer Stock Into Capital Gains With NUA
If your 401(k) holds heavily appreciated company stock, net unrealized appreciation can convert what would be ordinary-income RMDs into long-term capital gains. When you take a lump-sum distribution from a qualified plan that includes employer securities, the growth that happened inside the plan is excluded from gross income at distribution. You pay ordinary income tax only on the shares’ original cost basis.9Office of the Law Revision Counsel. 26 USC 402 – Taxability of Beneficiary of Employees Trust
When you sell the stock later, the appreciation is taxed at long-term capital gains rates, which top out at 20% rather than the 37% ordinary-income maximum. You have to take the entire plan balance in a single tax year, triggered by separation from service, reaching 59½, disability, or death. For someone sitting on employer stock that has grown substantially, the difference between NUA treatment and rolling everything into an IRA (where all future withdrawals become ordinary-income RMDs) can be large.
Don’t Stack Two RMDs Into One Year
Your first RMD comes with a deadline extension: you can wait until April 1 of the year after you turn 73 instead of December 31 of the year itself. The trap is that your second RMD is still due December 31 of that same following year, so delaying puts two RMDs in one tax year.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Two RMDs stacked can push you into a higher bracket, trigger Medicare surcharges, and increase the taxable share of your Social Security. For most people, taking the first RMD by December 31 of the year you turn 73 produces a lower two-year tax bill than using the April 1 grace date.
Missing an RMD is worse than mistiming one. The excise tax on a shortfall is 25%, dropping to 10% if corrected within two years, and a full waiver is possible by filing Form 5329 with a written statement explaining the reasonable cause.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs10Internal Revenue Service. Instructions for Form 5329 (2025)
Watch the Ripple Effects on Medicare and Social Security
The tax on the RMD itself isn’t the whole cost. RMD dollars feed into your modified adjusted gross income, which drives two more expenses that can be larger than the income tax.
Medicare IRMAA Surcharges
Medicare Part B and Part D premiums include an Income-Related Monthly Adjustment Amount based on your tax return from two years earlier, and the brackets act like cliffs: go one dollar over and you pay the higher premium for the whole year.11Social Security Administration. POMS HI 01101.031 – How IRMAA Is Calculated and How IRMAA Affects the Total Medicare Premium For 2026, joint filers stay surcharge-free below $218,000 of MAGI; the first Part B surcharge is $81.20 per person per month, and higher brackets go up from there.12CMS. 2026 Medicare Parts A and B Premiums and Deductibles An RMD that carries a couple from $217,000 to $220,000 in MAGI can add nearly $1,950 to the household’s annual Medicare cost. QCDs (which don’t hit MAGI at all) and Roth conversions done in earlier years (which shrink future RMDs) are the two most useful tools for staying under a cliff.
Social Security Taxation
Up to 85% of your Social Security benefits become taxable once your combined income (AGI plus tax-exempt interest plus half your benefit) crosses set levels. The 85% threshold begins at $44,000 for joint filers and $34,000 for single filers, and neither number is indexed for inflation.13Social Security Administration. Must I Pay Taxes on Social Security Benefits? Each RMD dollar adds directly to the AGI in that formula, so a modest RMD can flip a couple from 50% to 85% taxability on their benefits. The RMD is taxed, and it makes more of your Social Security taxable at the same time. Anything that lowers the RMD (a QCD in the same year, or Roth conversions done earlier) softens both hits.