Year-end is a critical time for retirees who are subject to required minimum distributions (RMDs) from their qualified retirement accounts. Missing this step can be costly — the IRS imposes a steep penalty of 50% of the amount you should have withdrawn if you fail to take your RMD on time.
For most retirees, the deadline is December 31 of each calendar year. The only exception is your very first RMD, which must be taken by April 1 of the year after you turn 73. For example, if you turned 73 in 2025, you’d have until April 1, 2026, to take that first withdrawal. However, delaying your first RMD could mean taking two RMDs in the same year, which may push you into a higher tax bracket — so timing is an important consideration.
The Tax Trap of RMDs
RMDs count toward your taxable income, which can have a ripple effect:
Higher tax bill — Increasing your adjusted gross income may push you into a higher tax bracket.
Medicare premium increases — Higher income can trigger surcharges on your Medicare Part B and Part D premiums.
Impact on deductions or credits — Your eligibility for certain tax benefits could be reduced.
If you’re over 73 and don’t rely on your RMD to meet your everyday living expenses, you may want to explore a strategy that satisfies the IRS rules without inflating your taxable income.
The Qualified Charitable Distribution (QCD) Strategy
A qualified charitable distribution allows you to make a direct transfer of up to $105,000 per year from your IRA to one or more qualified charities. This amount counts toward your RMD but is excluded from your taxable income — a win-win for charitably inclined retirees.
Here’s why it’s such a powerful tool:
Satisfies your RMD without adding to your adjusted gross income.
Supports causes you care about directly from your retirement savings.
Potentially reduces Medicare premium surcharges and other income-related tax consequences.
It’s important to note: if the funds are distributed to you first and then given to charity, they do not qualify as a QCD. The transfer must go directly from your IRA custodian to the charity to receive the tax benefits.
Example: How a QCD Can Save on Taxes
Let’s say Margaret is 75 years old and has an IRA with an RMD of $15,000 for the year. She’s in the 24% federal tax bracket and doesn’t need the RMD for living expenses.
If she takes the RMD as regular income:
$15,000 is added to her taxable income.
She owes $3,600 in federal income tax ($15,000 × 24%).
The higher income might also push her into a higher Medicare premium bracket.
If she makes a $15,000 QCD:
The $15,000 is sent directly from her IRA to her favorite qualified charity.
It counts toward her RMD but is not included in her taxable income.
She saves $3,600 in federal tax and may avoid Medicare premium increases.
In this case, Margaret meets her RMD requirement, supports a cause she cares about, and keeps her taxable income lower.
Timing and Record-keeping
Since QCDs must be completed by December 31 to count toward your current year’s RMD, it’s wise not to wait until the last minute. Processing times vary depending on your IRA custodian, and delays in paperwork could mean missing the deadline. Also, be sure to request and keep confirmation from the charity for your records — the IRS requires proper documentation for charitable contributions.
Bottom Line
RMDs are an unavoidable part of retirement planning, but how you take them can make a significant difference in your tax situation. If you don’t need the extra income, a qualified charitable distribution can help you meet your obligations to the IRS while making a meaningful difference to the causes you value most.
If you have questions about RMDs, QCDs, or other year-end tax strategies, reach out to schedule a conversation. We’ll help you design an approach that keeps you compliant, tax-efficient, and aligned with your personal financial goals.