From Kiplinger · · 1m 50s
Ask the Editor: IRA Tax Tips for Year-End Planning
Retirees can use IRA distributions to cover taxes without quarterly payments.
In brief
Retirees can use IRA distributions to cover taxes without quarterly payments. Retirees can have federal income taxes withheld from year-end IRA distributions to avoid quarterly estimated tax payments. Originally reported by Kiplinger.
Late-year withholding from an IRA
Retirees can have federal income taxes withheld from year-end IRA distributions to avoid quarterly estimated tax payments.
RMDs for retirees over 73
Individuals 73 and older must take annual RMDs from traditional IRAs by December 31, with 2026 RMDs due by April 1, 2027.
Qualified charitable distributions
Retirees 70½ and older can transfer up to $111,000 from traditional IRAs to charity tax-free.
Roth conversions and tax impacts
Roth conversions trigger income tax on converted funds and may increase Medicare premiums for those over 65.
Tax consequences of deferring RMDs
Deferring first RMD to 2027 increases taxable income by two RMDs in that year.
QCDs and tax benefits
Qualified charitable distributions reduce AGI and can count against RMDs for retirees 70½ and older.
Roth conversion tax traps
Roth conversions can increase AGI and trigger higher Medicare premiums for those over 65.
Tax planning for retirees
Retirees should consider Roth conversions as multiyear planning tools to avoid tax bracket jumps.
RMD deferral impact
Deferring first RMD to 2027 results in two RMDs being taxed in 2027.
QCD tax benefits
Qualified charitable distributions are not taxable and do not increase AGI for retirees 70½ and older.
Roth conversion and Medicare
Roth conversions can trigger higher Medicare premiums for those with modified AGIs over $218,000.
Tax planning strategy
Retirees should space out Roth conversions to avoid tax bracket jumps and Medicare premium surcharges.
The takeaway
Retirees can have federal income taxes withheld from year-end IRA distributions to avoid quarterly estimated tax payments.
