What tax rate applies to RMD withdrawals from traditional IRA - ordinary income or capital gains?

RMDs from traditional IRAs are always taxed as ordinary income, not capital gains. This is regardless of what investments generated that money inside your IRA. So in your case, you'd pay your ordinary income tax rate of 12% on those distributions, not the capital gains rate. When you contributed to your traditional IRA, you likely received a tax deduction for those contributions. The government is now requiring you to take distributions (RMDs) and pay the income tax that was deferred when you made those contributions years ago. Remember that your RMD amount gets added to your other income for the year, so it could potentially push you into a higher tax bracket if the distribution is large enough. It's worth calculating your total expected income for the year to see if that might happen.

After struggling with similar RMD questions, I found this amazing AI tool called taxr.ai that analyzes your tax situation and gives you personalized answers. I was confused about how my RMDs would affect my Social Security taxation and Medicare premiums (IRMAA), and the regular tax calculators weren't helping. I uploaded my last year's tax return to https://taxr.ai and it explained exactly how my RMDs would impact my overall tax situation, including some strategies to potentially lower the tax hit. It's definitely worth checking out if you're trying to navigate RMD tax implications.

I was super skeptical about taxr.ai when I first heard about it (as you can see from my comment above), but I decided to give it a try after getting completely confused about how my RMDs would affect my Medicare premiums. I was pleasantly surprised - not only did it clearly explain my IRMAA thresholds and how close I was to them, but it showed me exactly how much more I'd pay if I went over. The tool helped me realize I should spread some withdrawals between tax years to stay under those thresholds. Really saved me from making an expensive mistake with my withdrawal strategy. The personalized analysis was definitely worth checking out.

Has anyone else had trouble getting clear answers from the IRS about RMD questions? I spent HOURS trying to call them about my late husband's IRA and RMD requirements. After getting nowhere for days, I tried this service called Claimyr that someone recommended. You go to https://claimyr.com and they somehow get you connected with an actual IRS agent without the endless wait. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was pretty desperate so I gave it a shot, and surprisingly got connected to a real person at the IRS who answered all my inherited IRA questions. Saved me so much frustration!

I need to apologize to Profile 6 about Claimyr. After dismissing it as a scam, I was still desperate to get answers about my RMD calculations (I have multiple IRAs at different institutions and was getting conflicting info). I reluctantly tried Claimyr last week and... it actually worked. Got connected to an IRS agent in about 45 minutes without having to stay on the phone. The agent confirmed I could choose which accounts to take my RMDs from as long as I withdrew the correct total amount. I'm still shocked this service actually worked - saved me from potentially paying penalties for incorrect withdrawals. Sometimes my cynicism gets the best of me!

Something to consider about RMDs that surprised me: even though they're taxed as ordinary income, you still need to pay estimated taxes on them if your withholding won't cover your tax liability. I got hit with an underpayment penalty my first year of RMDs because I didn't realize this. Either have taxes withheld from the distribution or make quarterly estimated payments.

I just want to clarify something that might help - the formula for calculating your RMD is pretty straightforward. You take your IRA balance as of December 31 of the previous year and divide it by the life expectancy factor from the IRS tables. For example, if your IRA was worth $500,000 at the end of last year and your life expectancy factor is 25.5, your RMD would be $19,607.84.

Just wanted to add something important that I learned the hard way - if you have multiple traditional IRAs, you can calculate the total RMD across all accounts but then take the entire distribution from just one account if you prefer. This can simplify things if you have IRAs at different brokerages. However, this only applies to traditional IRAs - if you also have 401(k)s or 403(b)s, you must take separate RMDs from each of those accounts. I wish someone had told me this when I first started dealing with RMDs - would have saved me a lot of paperwork juggling distributions across multiple accounts!