How do you change your RMD withholding amount?

Contact your IRA custodian or plan administrator and complete a withholding election form (often Form W-4P). You can elect any percentage for IRA distributions. Changes typically apply to future distributions and may not affect distributions already processed.

Can you pay RMD taxes through estimated payments instead of withholding?

Yes. If you opt out of withholding, you must make quarterly estimated tax payments to cover the RMD income. Estimated tax is due in April, June, September, and January. Using quarterly estimates gives you more flexibility but requires more active management than simply withholding from the RMD.

What is the safe harbor for the December RMD withholding trick?

A useful strategy: if you wait until December to take your annual RMD, you can elect high withholding (e.g., 100%) from that single distribution. The IRS treats withholding as paid equally throughout the year — so a December withholding is treated as if paid in four equal installments, meeting the safe harbor and avoiding underpayment penalties even if no quarterly estimates were made earlier.

Scenario

Withholding Taxes on RMDs — Should You Withhold Federal and State Taxes?

Should you withhold federal income taxes from your Required Minimum Distribution?

When you take a Required Minimum Distribution, your IRA custodian or plan administrator will typically withhold federal income tax unless you opt out. The default withholding rate for IRA distributions is 10% federal. For employer plan distributions (like 401(k) periodic payments), a 20% mandatory withholding applies unless rolled over.

You can choose to withhold more (to match your effective rate), less (down to 0% for IRA distributions), or nothing — but opting out does not eliminate your tax obligation. Under-withholding means you must pay through quarterly estimated taxes or risk an underpayment penalty.

Key RMD Rules

1IRA distributions: default 10% federal withholding; you can elect any amount from 0% to 100%.
2Employer plan (401k, 403b) distributions: 20% mandatory withholding for eligible rollover distributions; 10% default for periodic payments.
3State income tax withholding: varies by state — most states tax RMDs as ordinary income; check your state's requirements.
4Underpayment penalty: applies if less than 90% of current-year tax is paid (or 100% of prior-year tax) through withholding + estimated payments.
5Safe harbor rule: withholding from December RMD counts as paid equally throughout the year — useful for those who delay the annual RMD to year-end.

Common RMD Mistakes to Avoid

⚠Opting out of all withholding without making quarterly estimated tax payments — this leads to underpayment penalties.
⚠Not accounting for state income taxes when setting withholding — federal-only withholding may not cover the full liability.
⚠Using the IRA's 10% default when the effective tax rate on RMDs is significantly higher.

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Frequently Asked Questions

Disclaimer: This content is for informational purposes only and does not constitute tax or financial advice. RMD rules are based on IRS Publication 590-B and SECURE 2.0 Act provisions. Always consult a qualified tax professional or financial advisor for guidance specific to your situation. IRS rules may change; verify current requirements at irs.gov.

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