RMD Tax Rates

[dubob]

I withdraw a set amount each month from my retired 401(k).  The total for the year exceeds my RMD by a factor of about 4.  RMDs are taxed at one rate and the over draw amount at a higher rate.  So even though the required RMD was suspended this year, wouldn't it be better to say I got the RMD and pay the lower tax rate on that portion of the total withdrawal? 

[VolvoGirl]

No they are all taxed at the same rate.   You must mean the tax withholding they took out was at a different rate.  That is not the actual tax but just an estimated amount like withholding from your paychecks.  When you enter the income on your tax return it is all taxed at your regular tax rate with all your income.  

[dubob]

Thank you.  My IRA company said they were taxed at different rates.  

[macuser_22]

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@dubob wrote:

Thank you.  My IRA company said they were taxed at different rates.  

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All IRA distributions are taxed as ordinary income at whatever your tax rate is,  based on all your income.   A RMD is just a distributions the same as any other distribution except that it is required.  Nothing about a RMD goes on a tax return at all - the questions is simply to add a penalty for failing to take it or prevent rolling it over which is not allowed (except for 2020 under the CARES Act).

Your "IRA company" should stick to IRA's and not give tax advice that they obviously know nothing about.

[dubob]

Agreed!  😁