How to pay taxes on an RMD comes down to two mechanics, plus one way to skip the tax entirely: you can have federal tax withheld directly from the distribution, send quarterly estimated payments to the IRS, or route the money to charity as a qualified charitable distribution. A required minimum distribution from a traditional IRA is taxed as ordinary income (Source: IRS Publication 590-B, 2025), so the practical question is not whether tax is owed but how and when to hand it over.
Most RMDs are taxed as ordinary income. You pay the tax either by electing withholding on the withdrawal (default 10%, adjustable 0%-100% on Form W-4R) or by making quarterly estimated payments with Form 1040-ES. A qualified charitable distribution, up to $111,000 per person in 2026, can satisfy an RMD tax-free (Source: IRS Notice 2025-67).
How is an RMD taxed?
An RMD from a traditional IRA is taxed as ordinary income in the year you take it, at your regular federal income tax rates (Source: IRS Publication 590-B, 2025). It is not taxed at capital gains rates, and it is added on top of Social Security, pension, and other income when your bracket is figured.
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Two carve-outs can reduce the taxable amount. To the extent an RMD is a return of basis from nondeductible contributions, or a qualified Roth IRA distribution, that portion is tax-free (Source: IRS Publication 590-B, 2025). Roth IRAs owned by the original account holder are not subject to lifetime required minimum distributions (Source: IRS Publication 590-B, 2025), which is one factor sometimes weighed with a qualified professional when a Roth conversion is considered in retirement tax planning.
RMDs generally begin by April 1 of the year following the year you reach age 73 (Source: IRS Publication 590-B, 2025). Because that age sits well past the 59 1/2 early-withdrawal threshold, the 10% additional tax on early distributions does not apply to an RMD. The mechanics of calculating the amount, the ages, and the life expectancy tables are covered separately in the Q3 Advisors required minimum distributions 2026 guide; this page focuses on paying the tax.
How to pay taxes on RMD: the two payment methods
You can pay the tax on an RMD in one of two ways, and many retirees use a mix. The first is withholding tax straight from the distribution, so the custodian sends part of the money to the IRS. The second is making quarterly estimated tax payments yourself. Both routes aim at the same target: staying inside the underpayment safe harbor so no penalty applies (Source: 2025 Instructions for Form 2210).
| Feature | Withholding from the RMD (Form W-4R) | Quarterly estimated payments (Form 1040-ES) |
|---|---|---|
| How it works | Custodian withholds federal tax from the distribution and remits it | You send four payments to the IRS across the year |
| Default rate | 10% on a nonperiodic IRA distribution unless you elect otherwise (Source: IRS Pub 575, 2025; Form W-4R) | No default; you calculate the amount owed |
| Adjustable? | Yes, 0% to 100% on Form W-4R line 2 (Source: Form W-4R) | Yes, any amount each quarter |
| Timing of credit | Treated as paid evenly across the four periods (Source: 2025 Form 2210 Instructions) | Credited on the date each installment is actually paid |
| Best fit | Retirees who want one less deadline to track | Retirees managing uneven income across the year |
Option A: withholding tax from the distribution
Withholding lets your IRA custodian send federal tax to the IRS at the moment you take the RMD, so the tax is handled without a separate payment. The default withholding rate on a nonperiodic IRA distribution that is not an eligible rollover distribution is 10%, unless you elect a different rate on Form W-4R (Source: IRS Publication 575, 2025; Form W-4R, 2026).
On Form W-4R you can enter any rate from 0% to 100% on line 2, including entering “-0-” to have nothing withheld (Source: Form W-4R). Someone whose RMD pushes them into a higher effective rate can raise the figure above 10% to cover the full liability from that single withdrawal.
The safe-harbor timing advantage of withholding
Withholding carries a timing benefit that estimated payments do not. For federal income tax that is withheld, you are considered to have paid one-fourth of the amount on each payment due date unless you can show otherwise (Source: 2025 Instructions for Form 2210). This timing treatment is a detail that is easy to overlook.
Because of that rule, tax withheld from a December RMD can retroactively count as if it were paid evenly across all four estimated-tax periods. A retiree who realizes late in the year that they are under-withheld can often take an additional distribution with heavy withholding, or increase withholding on the year-end RMD, and cure an underpayment that quarterly payments could not fix after the fact.
Option B: quarterly estimated tax payments
Estimated tax is the do-it-yourself route: you calculate the tax on your RMD and other income and send it to the IRS in four installments using Form 1040-ES. Under the regular method, the required installment is generally one-fourth of the required annual payment (Source: IRS Publication 505, 2026; Form 1040-ES, 2026).
Unlike withholding, each estimated payment is credited on the date you actually make it, so missing an early-year installment can trigger a penalty even if you catch up later. Retirees with income that lands unevenly, such as a large mid-year distribution, may use the annualized installment method to match payments to when the income was received and reduce or avoid a penalty (Source: IRS Estimated Taxes page).
Staying inside the underpayment safe harbor
The safe harbor is what keeps you penalty-free. No underpayment penalty applies if your withholding plus timely estimated payments equal at least the smaller of 90% of the current-year tax or 100% of the prior-year tax (Source: 2025 Instructions for Form 2210). That prior-year threshold rises to 110% if your prior-year adjusted gross income was over $150,000 (Source: 2025 Instructions for Form 2210; IRS Topic 306).
- A retiree can estimate the year’s total tax, including the RMD as ordinary income (Source: IRS Pub 590-B, 2025).
- That figure can be compared against 100% (or 110%) of last year’s tax to identify the smaller safe-harbor target.
- Expected withholding from wages, pensions, and the RMD itself is then subtracted from that target.
- Any remaining amount can be divided across the four Form 1040-ES installments, or shifted to year-end withholding.
Option C: use a QCD to satisfy the RMD tax-free
A qualified charitable distribution is a method that removes the tax rather than scheduling when it is paid. A QCD counts toward your required minimum distribution and is excluded from gross income, so the RMD amount given this way is not taxed at all (Source: IRS Publication 590-B, 2025). The money must go directly from the IRA to a qualified charity, and the account owner has to meet the age requirement.
The IRA owner must be at least age 70 1/2 on the date of the distribution to make a QCD, and it applies to traditional and inherited IRAs but not to ongoing SEP or SIMPLE IRAs (Source: IRS Publication 590-B, 2025). Because a QCD lowers adjusted gross income rather than acting as an itemized deduction, it can also help with income-linked thresholds such as Medicare IRMAA surcharges and the net investment income tax.
| QCD limit | 2025 | 2026 |
|---|---|---|
| Annual per-person exclusion | $108,000 | $111,000 |
| One-time split-interest (CRT/CGA) election | $54,000 | $55,000 |
The annual per-person QCD exclusion is $108,000 for 2025 and rises to $111,000 for 2026; the one-time gift to a split-interest entity is $54,000 for 2025 and $55,000 for 2026 (Sources: IRS Publication 590-B, 2025; IRS Notice 2025-67). Each spouse gets a separate limit.
Work with Q3 Advisors
Q3 Advisors is a registered investment adviser focused on retirement tax planning. This article is educational and is not advice; for guidance on your own circumstances, consult a qualified tax or financial professional.
Frequently asked questions
How much tax do you pay on an RMD?
An RMD from a traditional IRA is taxed as ordinary income at your regular federal rates, so the amount depends on your total taxable income and bracket for the year (Source: IRS Publication 590-B, 2025). There is no flat RMD tax rate. Any portion that is a return of basis or a qualified Roth distribution can be tax-free (Source: IRS Publication 590-B, 2025).
Should I have taxes withheld from my RMD or pay estimated taxes?
Both methods can satisfy the IRS. Withholding is treated as paid evenly across all four periods, which can cure a late-year shortfall (Source: 2025 Instructions for Form 2210). Estimated payments are credited when made and suit uneven income. Many retirees combine them to hit the underpayment safe harbor. The right mix depends on your circumstances and often benefits from professional review.
What is the default tax withholding rate on an RMD?
The default federal withholding rate on a nonperiodic IRA distribution that is not an eligible rollover distribution is 10%, unless you elect a different rate on Form W-4R (Source: IRS Publication 575, 2025; Form W-4R). On Form W-4R line 2 you can choose any rate from 0% to 100%, including zero if you plan to pay through estimated taxes instead.
Can a charitable donation reduce the tax on my RMD?
Yes. A qualified charitable distribution counts toward your RMD and is excluded from gross income, so that amount is not taxed (Source: IRS Publication 590-B, 2025). The IRA owner must be at least 70 1/2, and the funds must go directly to a qualified charity. The 2026 annual limit is $111,000 per person (Source: IRS Notice 2025-67).
Is there a penalty for not paying enough tax on an RMD during the year?
There can be an underpayment penalty if you pay too little through withholding and estimated payments. You generally avoid it by paying at least the smaller of 90% of the current-year tax or 100% of the prior-year tax, rising to 110% if prior-year AGI exceeded $150,000 (Source: 2025 Instructions for Form 2210; IRS Topic 306).
Does the 10% early-withdrawal penalty apply to RMDs?
No. The 10% additional tax applies to distributions taken before age 59 1/2, while RMDs begin at age 73 (Source: IRS Publication 590-B, 2025). By the time an RMD is required, you are well past the early-distribution threshold, so only ordinary income tax applies to the withdrawal.
Sources
IRS Publication 590-B (2025), Distributions from IRAs: https://www.irs.gov/publications/p590b
IRS Publication 575 (2025), Pension and Annuity Income: https://www.irs.gov/publications/p575
IRS Form W-4R (2026): https://www.irs.gov/pub/irs-pdf/fw4r.pdf
IRS Publication 505 (2026) and Form 1040-ES (2026): https://www.irs.gov/publications/p505
2025 Instructions for Form 2210, Underpayment of Estimated Tax: https://www.irs.gov/pub/irs-pdf/i2210.pdf
IRS Topic No. 306, Penalty for Underpayment of Estimated Tax: https://www.irs.gov/taxtopics/tc306
IRS Notice 2025-67 (2026 retirement and IRA amounts): https://www.irs.gov/pub/irs-drop/n-25-67.pdf
IRS RMD FAQs: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
