Do RMDs Affect Your Social Security Taxes?

Many retirees rely on both Social Security benefits and withdrawals from retirement accounts to fund their post-work years. A common point of confusion is whether Required Minimum Distributions (RMDs) from retirement accounts can impact the taxes owed on Social Security income. Understanding how these distinct financial elements interact is a key part of managing retirement finances effectively.

Understanding RMD Taxation

A Required Minimum Distribution, or RMD, is the amount of money that the federal government requires you to withdraw annually from most tax-deferred retirement accounts once you reach a certain age. The SECURE 2.0 Act raised the age for beginning RMDs to 73 for individuals who turn 72 after December 31, 2022. The age is scheduled to increase again to 75 starting in 2033.

These mandatory withdrawal rules apply to a range of retirement plans, including:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k)s
• 403(b)s

A notable exception is the Roth IRA, which does not require any distributions during the original owner’s lifetime. The purpose of RMDs is to ensure that individuals eventually pay taxes on the funds that have been allowed to grow with a tax advantage for decades.

The entire RMD is added to your other income for the year and taxed as ordinary income. If you fail to take your full RMD by the December 31 deadline, the IRS can impose a 25% penalty on the amount that was not withdrawn. This can be reduced to 10% if the mistake is corrected in a timely manner.

How Social Security Benefits Are Taxed

The taxation of Social Security benefits depends on a specific calculation created by the IRS. Whether your benefits are taxable hinges on your “provisional income,” a figure also referred to as combined income. This is not a number that appears on a standard tax form but must be calculated separately to determine the taxability of your benefits.

The formula for provisional income is: Adjusted Gross Income (AGI) + Nontaxable Interest + 50% of your annual Social Security benefits. AGI includes all sources of taxable income, such as wages, pensions, dividends, and withdrawals from traditional retirement accounts. Nontaxable interest from municipal bonds is also added back in for this calculation.

Once you determine your provisional income, you compare it to federal thresholds that have remained unchanged for 2024 and 2025. For single filers, if your provisional income is below $25,000, your benefits are not taxed. If it falls between $25,000 and $34,000, up to 50% of your Social Security benefits may be subject to income tax, and for provisional income above $34,000, up to 85% of your benefits could be taxable.

For those who are married and file a joint tax return, the thresholds are different. If your combined provisional income is below $32,000, none of your benefits are taxed. From $32,000 to $44,000, up to 50% of your benefits may be taxable, and if your provisional income exceeds $44,000, up to 85% of your benefits can be included in your taxable income.

The Connection Between RMDs and Social Security Taxation

While RMDs do not directly tax Social Security benefits, they have an indirect effect by increasing your overall income, which can trigger or increase the tax on your benefits. Your RMD is included in your Adjusted Gross Income (AGI). Since AGI is the starting point for calculating your provisional income, a mandatory withdrawal can push your provisional income over the thresholds, causing a larger portion of your Social Security to become taxable.

Consider a married couple filing jointly with $30,000 in pension income and $40,000 in annual Social Security benefits. Their AGI is $30,000. To calculate provisional income, they add half of their Social Security benefits ($20,000) to their AGI, for a total of $50,000, which is over the $44,000 threshold.

Now, let’s say they must also take a $20,000 RMD from a traditional IRA. This RMD is added to their AGI, raising it to $50,000. Their new provisional income calculation becomes $50,000 (AGI) + $20,000 (half of Social Security), for a total of $70,000, pushing their income further into the 85% taxability range.

An RMD does not reduce your monthly Social Security check, but it can lead to a higher tax bill when you file your annual return. The distribution from your retirement account inflates the income figure used by the IRS to determine how much of your Social Security is subject to taxation.

Strategies to Manage Taxable Income

One strategy for mitigating the tax impact of RMDs on Social Security is the use of Qualified Charitable Distributions (QCDs). A QCD allows an individual who is age 70½ or older to donate money directly from their IRA to an eligible charity. This transaction can satisfy all or part of their annual RMD, but the amount of the QCD is excluded from their AGI, which prevents the RMD from increasing provisional income.

For 2024, the annual QCD limit is $105,000 per person, and this amount is indexed for inflation, rising to $108,000 in 2025. To qualify, the funds must be transferred directly from the IRA custodian to the qualified charitable organization. This allows charitably inclined retirees to support causes they care about while managing their tax liability.

Another planning strategy involves converting funds from a traditional IRA to a Roth IRA in the years before RMDs begin. A Roth conversion is a taxable event in the year it occurs, but it reduces the balance in the traditional IRA, which in turn lowers the amount of future RMDs. Since Roth IRAs do not have RMDs for the original owner, converting assets over several years can shrink future mandatory withdrawals and help keep provisional income below the Social Security taxation thresholds.