GroundSkill
Determine required minimum distributions, plan-loan treatment, and inherited-account rules
Retirement money in traditional IRAs cannot stay tax-deferred forever. During life, a traditional, SEP, or SIMPLE IRA owner must start withdrawing on schedule and compute each year's amount from the account balance and a life-expectancy table. The original owner of a Roth IRA, by contrast, has no lifetime required distributions. Employer-plan loans must be repaid on schedule or become distributions. After death, the account passes to beneficiaries whose options depend on who they are. This lesson teaches lifetime withdrawals, plan-loan repayment rules, and inherited-account timing.
A required minimum distribution is the year's mandatory withdrawal from a traditional, SEP, or SIMPLE IRA. For an IRA owner, the first one arrives by April 1 of the year following the year the owner reaches age 73, and every later year's amount arrives by December 31 of that year. A participant in a qualified employer plan who is still working and is not a 5% owner starts later: distributions must generally begin by April 1 of the year following the later of the year the participant reaches age 73 or retires, so the starting year is the age-73 year or the retirement year, whichever applies to the required beginning date. The original owner of a Roth IRA, by contrast, has no lifetime required distributions. The arithmetic is fixed: divide the prior year-end account balance by the applicable denominator from the life-expectancy tables (Table III for most owners; Table II when the sole beneficiary is a spouse more than 10 years younger). Each year stands alone: taking extra one year gives no credit toward any later year. A shortfall draws a 25% excise on the undistributed amount, reported on Form 5329, reducible to 10% when the shortfall is made up inside the correction window with a reflecting return. Death-year timing follows the beginning date: if the owner dies before the required beginning date, there is no required minimum distribution for the year of death; if death is on or after the required beginning date, the beneficiaries are responsible for the owner's remaining required minimum distribution for that year, figured as if the owner lived for the entire year.
An owner turns 75 in 2026 with a $100,000 balance at the end of 2025 and an applicable denominator of 24.6. The 2026 RMD is \(100{,}000 \div 24.6 = 4{,}065\), and the distribution is $4,065 due by December 31, 2026. Missing it entirely exposes \(4{,}065 \times 25\%\), an excise of about $1,016, reducible toward \(4{,}065 \times 10\%\) when corrected inside the window.
Publication 590-B Page 4
You must begin receiving required minimum distributions by April 1 of the year following the year you reach age 73.View on the source
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To figure the required minimum distribution for 2026, divide your account balance at the end of 2025 by the applicable denominator from the table.View on the source
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you may have to pay a 25% excise tax for that year on the amount not distributed as requiredView on the source
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You may be subject to a reduced additional tax rate of 10% of the amount not distributedView on the source
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you take a distribution of the amount on which the tax is due (the excess accumulation) and submit a tax return reflecting this additional tax. The “correction window” ends on the earliest of the following dates: • The date of mailing the deficiency notice with respect to the imposition of this tax, • The date the tax is assessed, or • The last day of the second taxable year that begins after the end of the taxable year in which the additional tax is imposed.View on the source
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No. If you are the original owner of a Roth IRA, you don't have to take distributions regardless of your age.View on the source
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you must generally begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of: • The calendar year in which you reach age 73, or • The calendar year in which you retire from employment with the employer maintaining the plan.View on the source
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(The starting year is the year in which you reach age 73 or retire, whichever applies in determining your required beginning date.)View on the source
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If an IRA owner dies after reaching age 73, but before the IRA owner's required beginning date, no minimum distribution is required for that year because death occurred before the required beginning date.View on the source
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If the owner died on or after the required beginning date, the IRA beneficiaries are responsible for figuring and distributing the owner's required minimum distribution in the year of death. The owner's required minimum distribution for the year of death is generally based on Table III in Appendix B. However, if the sole beneficiary of the IRA is the owner's spouse who is more than 10 years younger than the owner, use the life expectancy from Table II. Note: You figure the required minimum distribution for the year in which an IRA owner dies as if the owner lived for the entire year.View on the source
Mara owns a traditional IRA. Her account balance at the end of 2025 was $123,000. She turns 75 in 2026. Her spouse is the sole beneficiary and is 6 years younger than Mara. For age 75 the Table III denominator is 24.6 and the corresponding Table II denominator is 25.3. What is her required minimum distribution for 2026?
A loan from an employer plan (never from an IRA) can stay tax free while it behaves like a loan: level installments at least quarterly, full repayment within 5 years of the loan date, with a longer term only when the loan acquired the main home. The amount is also capped: only the excess over the lesser of $50,000 (reduced by the highest outstanding balance in the prior year minus the current balance) or half the nonforfeitable accrued benefit (but not less than $10,000) counts as a distribution. A leave of absence without pay of up to 1 year pauses the level-payment requirement, with repayment still due within 5 years of the loan date and later installments no less than the original ones; a suspension during uniformed service may last longer than 1 year with the loan term extended, with payments resuming after service and repayment due within 5 years plus the suspension period. An ordinary 2-year stop in payments outside those cases breaks the schedule and the outstanding balance becomes a distribution. When the plan offsets an account to repay the loan, the offset can still be rolled over: a qualified offset after termination or severance runs to the return due date including extensions, while any other offset runs 60 days.
Mark borrows $30,000 on a 4-year level monthly schedule when his nonforfeitable benefit is $100,000 and he holds no other plan loans, and pays every installment. The loan sits within the amount cap and stays tax free throughout. Tom borrows $30,000 on the same 4-year level monthly schedule, then stops paying for 2 years of ordinary unpaid leave outside uniformed service. The schedule breaks and the outstanding balance becomes a distribution. Joan's offset, triggered by severance, gets more time: her qualified offset runs to her return due date including extensions for completing the rollover.
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the loan must require substantially level payments at least quarterly over the life of the loanView on the source
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You must repay the loan within 5 years from the date of the loan (unless the loan was used to acquire your main home).View on the source
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If a loan qualifies for this exception, you must treat it as a nonperiodic distribution only to the extent that the loan, when added to the outstanding balances of all your loans from all plans of your employer (and certain related employers, defined later), exceeds the lesser of: • $50,000; or • Half the present value (but not less than $10,000) of your nonforfeitable accrued benefit under the plan, determined without regard to any accumulated deductible employee contributions. You must reduce the $50,000 amount if you already had an outstanding loan from the plan during the 1-year period ending the day before you took out the loan. The amount of the reduction is your highest outstanding loan balance during that period minus the outstanding balance on the date you took out the new loan. If this amount is zero or less, ignore it.View on the source
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This level payment requirement doesn’t apply to the period in which you are on a leave of absence without pay or with a rate of pay that is less than the required installment. Generally, this leave of absence must not be longer than 1 year. You must repay the loan within 5 years from the date of the loan (unless the loan was used to acquire your main home). Your installment payments after the leave ends must not be less than your original payments.View on the source
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However, if your plan suspends your loan payments for any part of the period during which you are in the uniformed services, you won’t be treated as having received a distribution even if the suspension is for more than 1 year and the term of the loan is extended. The loan payments must resume upon completion of such period and the loan must be repaid in substantially level installments within 5 years from the date of the loan (unless the loan was used to acquire your main home) plus the period of suspension.View on the source
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if you have a qualified plan loan offset, you will have until the due date (including extensions) for your tax return for the tax year in which the offset occurs to complete your rolloverView on the source
Which of the following loans from a qualified plan must be treated as a distribution when made?
Death moves the timing question to the beneficiary. The surviving spouse who is sole beneficiary has a special election: be treated as the owner, which postpones distributions to the owner's would-be beginning date, or roll a distribution to another traditional IRA with no inclusion for the year received. An eligible designated beneficiary — the owner's surviving spouse, minor child, a disabled or chronically ill individual, or any individual not more than 10 years younger than the owner — takes life-expectancy payments, or, when the owner died before the required beginning date, may elect the 10-year rule instead. A designated beneficiary who is not an eligible designated beneficiary, such as a healthy adult daughter 25 years younger than the owner, must withdraw the entire balance by December 31 of the year containing the 10th anniversary of the owner's death. When the owner died on or after the required beginning date, that 10-year deadline applies in addition to annual required distributions: for years after the year of death, a designated beneficiary bases distributions on the longer of the beneficiary's single life expectancy in Table I or the owner's life expectancy. A non-individual beneficiary such as an estate is not a designated beneficiary, and its clock depends on when the owner died. If the owner died before the required beginning date, it follows the 5-year rule: the entire balance by December 31 of the year containing the fifth anniversary of the owner's death. If the owner died on or after the required beginning date, there is no 5-year deadline; the estate takes annual distributions over the owner's remaining life expectancy (the owner's Table I figure for the year of death, reduced by 1 each year). When an eligible designated beneficiary dies or a minor child reaches majority, the remainder must be distributed by December 31 of the year containing the 10th anniversary of that event, and a successor beneficiary gets no fresh life expectancy for that remainder. Inherited basis stays with its own account: separate Form 8606 computations keep an inherited IRA's basis apart from the beneficiary's own IRA basis.
| Beneficiary | Distribution rule |
|---|---|
| Surviving spouse, sole beneficiary | Elect ownership or roll over |
| Eligible designated beneficiary | Life-expectancy payments, or elect 10-year |
| Non-EDB individual (e.g. healthy adult daughter) | 10-year completion: all by Dec 31 of 10th-anniversary year |
| Estate or other non-individual, owner died before the RBD | 5-year rule: all by Dec 31 of 5th-anniversary year |
| Estate or other non-individual, owner died on or after the RBD | Annual distributions over the owner's remaining life expectancy |
An owner dies before the required beginning date with a spouse as sole beneficiary of one IRA and a healthy adult daughter, 25 years younger, inheriting another. The spouse elects to be treated as the owner and figures later distributions as if she were the owner, so she takes nothing yet. The daughter is not an eligible designated beneficiary, so she takes distributions on the 10-year track — the full balance by December 31 of the year containing the 10th anniversary of the owner's death — and owes tax as each arrives, tracking any inherited basis on its own Form 8606 rather than merging it with her own IRA.
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Like the original owner, you generally won't owe tax on the assets in the IRA until you receive distributions from it.View on the source
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A surviving spouse can roll over the distribution to another traditional IRA and avoid including it in income for the year received.View on the source
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If the owner’s beneficiary isn’t an individual (for example, if the beneficiary is the owner’s estate), the 5-year rule, discussed later, applies.View on the source
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The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the 10th anniversary of the owner’s death. For example, if the owner died in 2025, the beneficiary would have to fully distribute the IRA by December 31, 2035.View on the source
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The 5-year rule requires the IRA beneficiaries who are not taking life expectancy payments to withdraw the entire balance of the IRA by December 31 of the year containing the fifth anniversary of the owner’s death. For example, if the owner died in 2025, the beneficiary would have to fully distribute the IRA by December 31, 2030.View on the source
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Owner's life expectancy. You use the owner’s life expectancy to calculate required minimum distributions when the owner dies on or after the required beginning date and there is no designated beneficiary as of September 30 of the year following the year of the owner’s death.View on the source
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An IRA beneficiary is an eligible designated beneficiary if the beneficiary is the owner's surviving spouse, the owner's minor child, a disabled individual, a chronically ill individual, or any other individual who is not more than 10 years younger than the IRA owner.View on the source
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The 10-year rule applies if (1) the beneficiary is an eligible designated beneficiary who elects the 10-year rule, if the owner died before reaching their required beginning date; or (2) the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching their required beginning date.View on the source
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However, the beneficiaries of a deceased beneficiary don't calculate required minimum distributions using their own life expectancies. Instead, the deceased beneficiary's remaining interest must be distributed within 10 years after the beneficiary's death, or in some cases within 10 years after the owner's death.View on the source
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For a beneficiary receiving life expectancy payments who is either an eligible designated beneficiary or a minor child, the 10-year rule also applies to the remaining amounts in the IRA upon the death of the eligible designated beneficiary or upon the minor child beneficiary reaching the age of majority. In either of those cases, the 10-year period ends on December 31 of the year containing the 10th anniversary of the eligible designated beneficiary's death or the child's attainment of majority.View on the source
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If the owner died on or after their required beginning date (defined earlier) and you are a designated beneficiary, base your required minimum distributions for years after the year of the owner’s death on the longer of: • Your single life expectancy shown in Table I in Appendix B; or • The owner's life expectancy.View on the source
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Payment under the 10-year rule. If the IRA owner dies before the required beginning date and the 10-year rule applies, no distribution is required for any year before the 10th year.View on the source
Which of the following beneficiaries is an eligible designated beneficiary?
The course asks you questions like these as you learn, brings back the ones you miss, and ends with full-length practice exams.
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