How Are Required Minimum Distributions Taxed And When Do They Start

Required minimum distributions (RMDs) are taxed as ordinary income in the year you withdraw them, and for most people, they must begin by April 1 of the year after you turn 73.

When RMD tax rules start to apply

The specific age trigger depends on your birth year. If you were born between 1951 and 1959, your required beginning date is April 1 of the year after you turn 73. If you were born in 1960 or later, you get a later start: April 1 of the year after you turn 75. This change comes from the SECURE 2.0 Act, which raised the prior age of 72. For example, if you turn 73 on October 15, 2025, your first RMD is due by April 1, 2026, covering the 2025 tax year. However, that April 1 deadline is a one-time grace period. For every subsequent year, you must take the full RMD by December 31 of that year. So if you skip the grace period and wait until March 2026, you’ll owe a second RMD for 2026 by December 31, 2026. That means two taxable distributions in one calendar year, a common trap that pushes retirees into a higher bracket.

How the withdrawal is taxed

Every dollar you withdraw from a traditional IRA, 401(k), 403(b), or similar pre-tax account is added to your gross income for the year. The IRS taxes it at your marginal federal rate, the same rate that applies to wages. For 2025, the IRS sets the federal tax brackets. A married couple filing jointly with taxable income at the top of the 22% bracket could see a withdrawal push them higher. But the bigger risk is that a large distribution pushes you into a higher bracket. Beyond income tax, a large RMD can trigger the Net Investment Income Tax (NIIT). This applies if your modified adjusted gross income exceeds the threshold the IRS sets for your filing status. It can also raise your Medicare Part B and Part D premiums, which the Centers for Medicare & Medicaid Services adjusts annually based on income. This is why the hub for this topic, retirement & investment taxes, emphasizes planning the withdrawal amount against your other income streams, not just taking the minimum blindly. The tax treatment is identical to how are traditional IRA contributions and withdrawals taxed, you got a deduction on the way in, so the IRS collects on the way out.

The costly mistake of missing the deadline

If you fail to withdraw the full RMD by the deadline, the IRS imposes a 25% excise tax on the amount you should have taken but didn’t. That penalty drops to 10% if you correct the error within two years and file Form 5329 with your tax return, but you must act quickly. You can request a waiver of the penalty entirely by writing a letter to the IRS. In the letter, explain that the failure was due to reasonable error and that you’ve since taken the distribution. The IRS grants these waivers routinely for first-time mistakes. This is especially true if you can show you relied on bad advice from a financial advisor or misinterpreted the rules. But the longer you wait, the harder it becomes. The IRS is far less forgiving if you’ve missed multiple years or ignored notices. The penalty is separate from income tax, so you’ll still owe tax on the amount you eventually withdraw. The true cost of missing an RMD can far exceed the penalty alone once combined taxes are added.

Required minimum distributions are taxed as ordinary income in the year you withdraw them. For most people, they must begin by April 1 of the year after you turn 73. This means the IRS treats every dollar you take out as taxable earnings, just like a paycheck. Your age only determines *when* the clock starts, not *how* the tax applies. If you delay your first withdrawal to the April 1 deadline, you’ll still owe tax on that amount for the prior year. You’ll also have to take a second distribution by December 31 of that same year, which can stack your income unexpectedly.

Frequently asked questions

Can I take more than the RMD amount in any given year?

Yes, you can always withdraw more than the required minimum, but the excess does not count toward future years’ RMDs. Any amount above the minimum is simply treated as a normal taxable distribution. It reduces your account balance, which may lower future RMDs.

What if I still have a 401(k) from a former employer, do I need separate RMDs for each account?

No, you can aggregate your IRAs and take one combined RMD, but 401(k) accounts are different. For employer plans, you must take RMDs from each plan separately. The exception is if you roll them into an IRA first, which simplifies the process and gives you more control over the timing.

Do Roth IRAs have required minimum distributions?

No, Roth IRAs are exempt from RMD rules during your lifetime. However, if you inherit a Roth IRA, the beneficiary must follow inherited account rules. These rules may require annual withdrawals depending on their relationship to you and the account’s value. For a deeper look at how these and other distribution rules fit into your broader financial picture, see our guide on retirement & investment taxes, which covers the full landscape of what to know and how to handle it.