What tax-planning strategies can beneficiaries use now to minimize taxes under the 2026 RMD rules?
Executive summary
Beneficiaries facing the 2026 “RMD cliff” should consider a small toolkit of widely recommended moves now: qualified charitable distributions (QCDs) to reduce AGI and satisfy RMDs, Roth conversions (or partial conversions) to shrink future taxable RMDs, and timing/asset-selection tactics for distributions this year to manage tax brackets and Social Security interaction (QCDs and Roth conversions are cited repeatedly) [1] [2] [3]. Tax advisers warn the rules are nuanced and the IRS postponed some new RMD regulation applicability until 2026, so execute strategies in consultation with advisors and document good-faith interpretations where rules remain unsettled [4] [5].
1. Use QCDs to trim taxable RMDs and AGI: a direct, often-cited lever
A Qualified Charitable Distribution (QCD) lets an IRA owner aged 70½+ send part or all of an RMD straight to a qualified charity, excluding that amount from adjusted gross income; planners note this can both satisfy RMD obligations and reduce AGI-driven bites like Social Security taxation and bracket creep—many outlets highlight QCDs as a primary tool for 2025/2026 planning [1] [3] [6]. Journal of Accountancy and other advisers recommend considering whether to bunch charitable gifts into 2025 versus 2026 because changes to deduction floors/ceilings in 2026 may alter the after‑tax value of donations, but QCDs remain useful because they bypass some emerging limits [6].
2. Roth conversions: pay tax now to avoid larger taxable RMDs later
Multiple firms and wealth outlets list Roth conversions as a key strategy: converting Traditional IRA assets to a Roth triggers income tax in the conversion year but removes those assets from future RMD calculations, producing tax-free growth and distributions later and reducing inherited-RMD burdens for beneficiaries of Roth accounts [2] [7]. Sources caution conversions can be expensive in high-income years and are most attractive when taxable income is temporarily lower or if you expect higher rates in 2026 [8] [2].
3. Accelerate or delay withdrawals within the existing calendar to manage brackets
Advisers recommend taking into account market conditions and your projected 2026 bracket: taking distributions during downturns (selling bonds/cash during lows or taking gains earlier in up markets) and timing the first RMD versus waiting until April can materially affect whether you hit a higher bracket or double up RMDs in one year [9] [8] [3]. However, delaying the first RMD until April means you may take two RMDs in one calendar year, which could push you into a higher bracket—sources urge personalized advice before using that tactic [3].
4. Asset selection and in-kind transfers: reduce taxable capital gains within RMDs
Some advisors note converting or transferring specific securities in-kind for RMDs (or when doing Roth conversions) can manage tax exposure by selecting assets with favorable gain/loss profiles; this is a tactical move to meet distribution amounts while limiting realized gains [8]. Sources emphasize this requires custodian cooperation and careful calculation of fair market value for the RMD amount [1] [8].
5. Leverage other year‑end moves: bunching, gifts, and employer-plan options
Year-end choices such as bunching charitable gifts into 2025, making use of available gift/estate windows, and evaluating whether you can delay RMDs from an employer plan if still working (subject to plan rules and ownership thresholds) appear across guidance: bunching can preserve itemized deduction value given 2026 limits, and staying employed can let some participants defer plan RMDs until retirement [6] [4] [10].
6. Regulatory uncertainty and the counsel to document good‑faith positions
The IRS announced it will not apply certain proposed RMD regulations earlier than the 2026 distribution year; commentators say taxpayers should use reasonable, good‑faith interpretations of statute for periods before final applicability and consult advisers to reduce implementation risk [5]. Practitioners repeatedly warn the landscape is “highly nuanced” and to consult a tax professional to confirm specific inherited‑IRA RMD requirements and optimal tactics [4] [3].
7. Tradeoffs and practical warnings: don’t optimize taxes in isolation
Sources uniformly flag tradeoffs: Roth conversions cost current tax dollars and can reduce longevity of assets if you withdraw too aggressively; QCDs only work from IRAs (not 401(k)s); deferring or bunching can create years with higher taxable income; and missing RMDs triggers excise taxes (25%, 10% if corrected timely) [2] [3] [10]. Practitioners insist on tailored advice given the interaction with Social Security taxation, Medicare IRMAA risk, and estate goals [1] [3].
Available sources do not mention any specific numeric “safe” thresholds customized to every beneficiary situation; consult your tax advisor to model your own 2025 vs. 2026 tax scenarios and to document the chosen approach in light of pending regulatory changes [4] [5].