The 2026 RMD Rule Change That Could Trigger a Massive Tax Bill for Certain Retirees
Tax law can be hard to understand on a good day. However, when the U.S. government announces changes to tax laws, many people scramble to keep up. Take, for example, the 2026 updates to Required Minimum Distributions (RMDs) proposed under the SECURE Act 2.0.
The change to the law will help some retirees keep more of their money in their pockets. However, certain folks will end up with a bigger tax bill, especially if they didn't plan ahead and make changes to how they receive these disbursements. We spoke with an expert to find out what you need to know so that you can prepare to make these changes ahead of the IRS deadline. Here's what they said.
What is the New RMD Rule
Effective 2026, if a worker is 50 or older and the prior year's wages exceeded $145,000 per year, any catch-up contributions to an employer plan must be made into a Roth account, according to Roland Chow, financial planner and portfolio manager at Optura Advisors. "Because by default these funds now go into Roth, this bucket of money is shielded from lifetime RMD requirements."
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What Specific Tax Penalties Might You Face if You Miss Your Two-Year Window
The penalty is based on the amount that should have been withdrawn but was not, according to T.L. Turnipseed at Alta Trust Company. "Under SECURE Act 2.0, the excise tax is generally 25 percent of the shortfall, reduced to 10 percent if the missed RMD is corrected within the applicable two-year correction window," he says, adding that you should file Form 5329 for the year the RMD was missed, and the IRS can waive the tax entirely if the failure was due to reasonable error and reasonable steps are being taken to fix it.
"As a simple example, if a client was required to withdraw $40,000 but withdrew only $25,000, the $15,000 shortfall could produce a $3,750 excise tax, or $1,500 if corrected in time," he says.
Related: 4 Things Most People Regret Buying in Retirement, According to Experts
How to Use Qualified Charitable Distribution to Lower Your Tax Bill
Chow says that you can use a Qualified Charitable Distribution (QCD) to lower your tax bill. "Instead of writing a check to a charity, give to the charity out of the IRA via QCD," he says. "Essentially, the charity gets more since these are pre-taxed dollars, and the retiree effectively lowers their AGI by not doing a withdrawal against the IRA."
However, Chow notes that a QCD doesn't just reduce the retiree's income taxes; it can also lower taxes on Social Security income and Medicare premiums. "With an RMD or normal distribution against an IRA account, there are ordinary income taxes against that distribution. Plus, it can increase the taxes assessed against social security and against Medicare premiums."
The $111,000 limit for QCD this year applies per person, according to Chow, who says a retiree can QCD up to that limit, and then their spouse can also QCD up to that limit. "This allows a tremendous amount to be given away, plus there may be even more advanced strategies by which a client can receive income and leave a legacy via their QCDs."
Of course, you'll want to talk to a certified tax pro to make sure that these options will work in your unique financial situation. Not just so that you can minimize the amount of taxes that you owe, but so that you can also make sure there aren't other tax issues lying in wait.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
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This story was originally published May 15, 2026 at 12:46 PM.