IRA Required Minimum Distributions By December 31
Published December 12, 2025
The Internal Revenue Service (IRS) reminds taxpayers who turned 73 in 2025 that they should take a required minimum distribution (RMD) by December 31. While taxpayers who are 73 may delay their first RMD until April 1, 2026, they must also take a second RMD by December 31, 2026.
RMDs are generally required for most qualified retirement plans. RMDs apply to three types of individual retirement arrangements (IRAs). These are traditional IRAs, Simplified Employee Pension (SEP) IRAs and Savings Incentive Match Plans for Employees (SIMPLE) IRAs.
The RMDs also apply to traditional 401(k), 403(b) and 457(b) plans. There is an exception to the RMD withdrawal requirement for Roth IRAs and Roth 401(k)s. There are no distribution requirements for the Roth plans as long as the original owner is living.
Most taxpayers take the RMD based upon the Uniform Lifetime Table in IRS Pub. 590-B. This table assumes there is a beneficiary within 10 years of the IRA owner’s age and calculates a distribution amount based on both ages. If the IRA owner has a spouse more than 10 years younger, a different table is applicable.
Owners of multiple IRAs must calculate the RMD for each plan. However, an IRA owner can elect to withdraw the total RMD amount from any IRA plan.
Some employees over 73 who are still working and are not major owners of a business may be able to defer RMDs until after retirement. Taxpayers should consult with a tax advisor if this exception is applicable.
Many online calculators are available to determine your RMD. Most large financial companies offer an online determination of the correct amount. RMDs start at approximately 3.8% of the December 31 IRA balance. They increase each year after 73. There are also online worksheets on IRS.gov that may be helpful.
The IRS released the current IRA distribution tables in 2021. These tables reflect longer life expectancies and the RMDs are somewhat reduced.
Editor’s Note: An excellent way to fulfill an RMD is to give part or all of the distributions from a traditional IRA to a qualified charity. Qualified charitable distributions (QCDs) are available to individuals over 70½. A benefit of the QCD is that it may fulfill part or all of a taxpayer’s RMD. The QCD is a transfer directly from the IRA custodian to a qualified charity. A QCD up to $108,000 may be transferred in 2025. It is important to act quickly if you plan to do a QCD this year. Your QCD must be completed by December 31, 2025.
Expanded Health Savings Account Rules
Health savings accounts (HSAs) are an excellent way to save for medical expenses. An individual may make contributions to an HSA that are tax deductible. The HSA must include a high-deductible health plan (HDHP) with specific requirements. The HSA limits in 2026 will be $4,400 for an individual or $8,750 for a family plan. Individuals over age 55 may contribute an additional $1,000.
The primary benefit of the HSA is that the individual account may receive contributions each year and will grow tax free in a manner similar to qualified retirement plans. An individual may make contributions over multiple years and build up a substantial amount that will cover future medical co-pays and other qualified expenses.
The One Big Beautiful Bill Act (OBBBA) expanded the HSA options. It allowed new telehealth and remote care services, expanded the types of qualified plans and permitted payments for direct primary care service arrangements (DPCSAs). In Notice 2026-05, the Internal Revenue Service (IRS) published Questions and Answers on the expanded HSA rules.
1. Telehealth Coverage Permitted
When HSAs were created in 2004, telehealth services were not covered. However, during the COVID-19 pandemic, Congress allowed coverage for telehealth visits and virtual primary care.
The new IRS rules allow telehealth services if they are on the Medicare annual list or align with the Department of Health and Human Services (HHS) definitions. These telehealth services may be included as part of a qualified HSA healthcare plan.
2. Bronze and Catastrophic ACA Plans May Qualify
Prior to OBBBA, most Affordable Care Act (ACA) bronze or catastrophic plans did not qualify because the out-of-pocket maximums exceeded the HDHP limits. However, starting in 2026, the ACA Exchange’s bronze or catastrophic plans will be treated as a HDHP for HSA purposes. This is the case even if the out-of-pocket maximums exceed the traditional limits. Plans that are not on the ACA Exchange may also qualify if they offer the same coverage. In addition, under the "sound tax administration" principle, the plan may qualify if the individual has a reasonable belief that it is eligible.
3. Direct Primary Care Service Arrangement (DPCSA)
Another OBBBA change is that a DPCSA may now be treated as permitted coverage that does not disqualify an individual from contributing to an HSA. The DPCSA is a medical arrangement with a primary care physician who may have a specialty designation in family, internal, geriatric or pediatric medicine. The payment must be a fixed amount, with a maximum of $150 per month for an individual or $300 per month if multiple family members are covered for purposes of HSA eligibility. These numbers will be adjusted for inflation after 2026. The DPCSA payment must be a fixed amount, and it cannot be tied to or billed for specific services. The medical services may not include general anesthesia, drugs other than vaccines or certain lab services.
DPCSA payments are not considered insurance and coverage under a qualifying DPCSA will not cause an individual to lose eligibility to contribute to an HSA. If aggregate monthly DPCSA fees exceed the applicable limit, the fees may still be reimbursable from an HSA, but reimbursement will result in HSA contribution ineligibility for the period of coverage. Payments made by an employer or through a salary reduction plan are not qualified.
This Dog Will Not Hunt
In Amanda Reynolds v. United States; No. 2:25-cv-03447, a District Court stayed discovery in an individual's suit claiming that a dog qualified as a dependent for income tax purposes.
Finnegan Mary Reynolds (Finnegan) is a golden retriever owned by plaintiff Amanda S. Reynolds (Reynolds). Reynolds has owned Finnegan since 2016 and provided "safe harbor, food, shelter, veterinary care, training, daycare and boarding without tax recognition." Reynolds brought an action presenting the "novel but urgent question" of whether Finnegan should be recognized as a dependent under the Internal Revenue Code.
Reynolds claimed that the IRS should recognize Finnegan as a dependent and that a failure of the IRS to do so would be a violation of the Fourteenth Amendment’s Equal Protection Clause or a taking in violation of the Fifth Amendment. Plaintiff claimed the support provided to Finnegan is sufficient to "meet or exceed the definitional criteria of ‘support’ under 26 U.S.C. Section 152.” In addition, the dog is a “functional integration” into her household.
The Court determined the IRS motion to stay discovery should be granted. The IRS demonstrated that Plaintiff's claims are not meritorious. Therefore, it is likely the IRS will be able to prevail on a motion to dismiss the Complaint.
The IRS claimed Plaintiff has not suffered tax injury and, therefore, the claim is barred by the Anti-Injunction Act (26 U.S.C. Section 7421(a)). In addition, Plaintiff did not comply with the requirement to send a copy of the summons and complaint by registered or certified mail to the United States attorney for the district in which the action was brought.
Plaintiff claimed an IRS violation under the Fourteenth Amendment. However, the IRS correctly notes the Fourteenth Amendment applies to state actors, and the IRS is a federal actor. Therefore, the Fourteenth Amendment claim will likely fail.
A second claim is under the Fifth Amendment alleging that exclusion of a dog-related deduction constitutes a wrongful taking of property. However, the Takings Clause of the Fifth Amendment is designed to prevent the government from taking private property. The payment of taxes is not covered by the Fifth Amendment's Takings Clause. In addition, the IRS "requirement that dependents be human beings is rationally related to the legitimate government interest in preventing fraud and abuse in the tax system."
The Court recognized that there is a deep passion and dedication for animals as pets. However, the animals are not qualified as tax dependents. The IRS and the Tax Courts have determined that while "every dog has its day,” animals may not qualify as dependents for tax purposes. Given the likelihood that the IRS would prevail on a motion to dismiss the case, the Court granted the motion to stay discovery.
Editor's Note: After analysis of the Constitution and the Internal Revenue Code, the Court determined that the dog is not a qualified dependent. In common terminology, "this dog will not hunt."
Applicable Federal Rate of 4.6% for December: Rev. Rul. 2025-24; 2025-50 IRB 1 (17 November 2025)
The IRS has announced the Applicable Federal Rate (AFR) for December of 2025. The AFR under Sec. 7520 for the month of December is 4.6%. The rates for November of 4.6% and October of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2025, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”
