Yearend Retirement Tax Moves for Caregivers: RMDs, QCDs, and Roth Conversions
If you are in your 50s or 60s and caring for aging parents, December can feel like a sprint. You are balancing your own retirement planning while making sure your parents’ accounts, healthcare, and taxes are handled correctly. The good news: a few focused year-end moves can reduce your family’s lifetime tax bill, lower Medicare surcharges, and simplify record keeping for tax time. Here is a practical guide you can work through in an afternoon, with plain-language examples and a short checklist at the end.
Confirm All Required Minimum Distributions (RMDs)
Start by confirming whether both you and your parents must take RMDs this year. Key reminders:
· Who owes an RMD: Traditional IRAs and most employer plans usually require RMDs starting at age 73. Inherited IRAs have different rules depending on the beneficiary and the decedent’s date of death.
· Deadline: December 31 for the current year’s RMD, except for first-time RMDs at age 73, which can be delayed until April 1 of the following year, though that can bunch income into one tax year.
· Penalties: The IRS assesses a 25 percent excise tax on missed RMDs, potentially reduced to 10 percent if corrected promptly.
Simple example: Your mom is 79 with a traditional IRA. Her custodian shows an RMD of $18,400. Confirm it has been distributed to her bank account before December 31, or transferred to charity via a QCD if she qualifies and wants to give.
Documentation to save:
· Custodian RMD calculation or confirmation
· Year-end statement showing the distribution
· Form 1099-R when it arrives in January, to match tax reporting
Tip: use our IRA Required Distributions Calculator to cross-check custodian figures and plan next year’s withdrawals. Especially useful if the IRA moved custodians during the year and the figure has been lost.
Use Qualified Charitable Distributions (QCDs) to Reduce Taxable Income
If you or your parents are age 70½ or older and give to charity, consider making gifts directly from an IRA as a QCD. Up to $108,000 per person in 2025 can go from IRA to qualified charity and never hit adjusted gross income. QCDs can also satisfy RMDs.
Why this helps:
· Reduces taxable income, which can lower Medicare’s IRMAA surcharges and reduce taxation of Social Security.
· You receive the benefit even if you do not itemize deductions.
Example: Your dad owes a $15,000 RMD and gives $15,000 annually to his church. He directs the IRA custodian to send the $15,000 directly to the church as a QCD. He satisfies his RMD and keeps his adjusted gross income lower compared with taking the RMD to his bank and then writing a check.
Documentation to save:
· Charity acknowledgment letter that clearly references a QCD and states no goods or services were received
· IRA custodian confirmation of the direct transfer
· 1099-R, noting that QCDs are reported as a normal distribution but you will claim the QCD on the tax return
Evaluate Roth Conversions with aRothmetic While in the 22 to 24 Percent Brackets
Roth conversions remain one of the most powerful lifetime tax tools for caregivers heading into retirement. The key is intentional sizing, not guesswork. With aRothmetic, we model conversions that target the top of your current bracket, weigh the impact on lifetime taxes, and consider IRMAA thresholds. Decisions should be based on your lifetime tax map.
What to consider:
· Fill the 22 or 24 percent bracket without spilling into a higher bracket.
· Check the two-year lookback for Medicare IRMAA. A conversion that pushes you over an IRMAA tier can be fine if the long-term benefits outweigh the temporary surcharge, but it should be a choice, not a surprise.
· Coordinate with other income sources, such as capital gains or a bonus.
Example: You are married filing jointly with projected taxable income of $160,000, leaving about $80,000 of room in the 24 percent bracket. Converting $70,000 to a Roth IRA this year may reduce your future RMDs, create tax-free income later, and build flexibility for future giving or legacy goals.
Documentation to save:
· Advisor meeting notes and conversion rationale
· Custodian Roth conversion confirmation
· Year-end statement and upcoming 1099-R
Coordinate Withdrawals to Manage IRMAA
Medicare Part B and Part D premiums increase if your modified adjusted gross income crosses certain thresholds. That is IRMAA. A well-timed QCD, a carefully sized Roth conversion, or shifting part of a distribution into January can help you avoid jumping tiers.
Practical steps:
· Map this year’s projected modified adjusted gross income now. Include wages, RMDs, Roth conversions, capital gains, and interest.
· If you are close to a threshold, consider trimming a conversion amount or using QCDs to keep adjusted gross income down.
· If you had a major life change that reduced income, you can request an IRMAA reconsideration using Form SSA-44.
Gifting, Inheritances, and Fees, Quick Answers
How much can you inherit without paying federal taxes? The federal estate and gift tax exemption is very high for most families, and beneficiaries generally do not owe federal income tax on what they inherit. However, traditional IRAs are taxable when withdrawn by the beneficiary, and some states have estate or inheritance taxes. Planning ahead with beneficiary designations, trusts, and withdrawal strategies helps reduce friction.
Do you have to report inheritance money to the IRS? You usually do not report an inheritance as income. Exceptions include distributions from inherited pre-tax retirement accounts, which are taxed as ordinary income when withdrawn, and certain interest or dividends those assets generate after you receive them.
Are financial advisor fees tax deductible? For individuals, most investment advisory fees are not deductible under current federal rules. There are limited exceptions for certain business or rental activities. Many families still prefer working with a flat-fee fiduciary model that aligns advice with your best interests.
What are the IRS rules for gifting money to family members? In 2025, you can generally give up to the annual exclusion amount per recipient without filing a gift tax return. Gifts above the annual exclusion may require a gift tax return and reduce your lifetime exemption, but very few people pay gift tax.
What is the role of financial planning? Financial planning brings structure to complex, multi-year decisions. It coordinates taxes, investments, withdrawal sequencing, estate documents, and caregiving realities into a single plan you can follow. That clarity helps you cut your lifetime tax bill, reduce surprises, and free up time for family.
What to Document Before December 31
Create a simple folder, digital or paper, and save:
· RMD confirmations, including custodian calculations and proof of distribution
· QCD letters from charities and custodian confirmations
· Roth conversion confirmations and your advisor’s meeting notes
· Year-end statements for all accounts and the 1099-Rs when they arrive
· A short written summary of what you did and why, dated and saved for next year’s reference
A Short Year-End Checklist
· Confirm parents’ and your RMDs are satisfied
· If 70½ or older and charitably inclined, complete QCDs
· Run aRothmetic to right-size a 2025 Roth conversion plan
· Map IRMAA thresholds and adjust distributions or conversions, if needed
· Verify beneficiary designations and account titling align with your estate plan
· Save all year-end confirmations in one place
Bring It All Together
A few decisive steps this month can lower lifetime taxes, reduce Medicare surcharges, and simplify April. If you want a second set of eyes, schedule a complimentary consultation. We will help you run aRothmetic and the IRA Required Distributions Calculator, coordinate caregiver responsibilities with your own retirement goals, and create a written plan you can follow with confidence.
