Are Inherited IRAs Taxable? Traditional, Roth, and the 10-Year Rule

Are inherited IRAs taxable? In most cases, yes for traditional IRAs and no for Roth IRAs. Every dollar you pull from an inherited traditional IRA counts as ordinary income on your federal return, because the original owner never paid tax on that money. Withdrawals from an inherited Roth IRA are generally tax-free, as long as the account had been open for at least five years. How much tax you actually pay, and over how many years you pay it, depends on your relationship to the person who died, the type of IRA, and when the original owner passed away.

Inherited Traditional IRAs: Taxed as Ordinary Income

Withdrawals from an inherited traditional IRA are added to your other income for the year and taxed at your regular federal rate. For 2026, those rates run from 10 percent at the bottom up to 37 percent on income above $640,600 for single filers or $768,700 for married couples filing jointly.¹ The tax hits because the original owner either deducted those contributions or let the money grow untaxed.

A large single-year withdrawal can push you into a higher bracket. Someone whose regular income sits in the 22 percent bracket who then takes a $100,000 lump sum from an inherited IRA could see part of that withdrawal taxed at 24 or 32 percent. Spreading the money out across several tax years is usually the difference between keeping most of the inheritance and handing a chunk of it to the IRS.

Inherited Roth IRAs: Usually Tax-Free

The original owner of a Roth IRA already paid income tax on every dollar contributed, so withdrawals of both contributions and earnings from an inherited Roth IRA are generally tax-free.² There is one condition: the account must have been open for at least five years. The clock starts on January 1 of the tax year the original owner first funded any Roth IRA, not the date you inherited it.

If the owner opened the Roth less than five years before dying, the earnings portion of your distributions may be taxable as ordinary income. Original contributions still come out tax-free regardless of the account’s age, because that money was already taxed.³ Most inherited Roth IRAs easily clear the five-year mark, but the account’s opening date is worth confirming before you assume the whole distribution is tax-free.

The Portion That Isn’t Taxable: Non-Deductible Basis

Not every dollar in an inherited traditional IRA is taxable. If the original owner ever made non-deductible contributions, meaning they put in after-tax money that was never deducted, part of each distribution is a return of already-taxed money and should not be taxed again.

To claim the tax-free portion, you need the original owner’s total basis. That figure comes from their prior Form 8606 filings, which track non-deductible contributions year by year.⁴ As the beneficiary, you file your own Form 8606 to calculate how much of each distribution is tax-free. Without the deceased owner’s records, you risk treating the whole distribution as taxable and overpaying. Ask the executor or the IRA custodian whether non-deductible contributions were made before you file.

The 10 Percent Early Withdrawal Penalty Does Not Apply

Beneficiaries often worry about the 10 percent early withdrawal penalty. It does not apply to distributions from an inherited IRA, no matter your age or your relationship to the person who died. Federal law specifically exempts distributions made to a beneficiary after the account owner’s death.⁵ Spouses, children, siblings, friends, trusts, and estates all qualify for the exemption. The penalty only applies to distributions from an IRA the taxpayer personally owns and takes before age 59½.

How Fast You Have to Empty the Account

Timing controls how big your annual tax bill gets. The rules depend on who you are.

Surviving Spouses

A surviving spouse has the widest set of options. Federal tax law lets a spouse treat the inherited IRA as their own by retitling the account.⁶ That delays required withdrawals until the spouse reaches their own required beginning age, currently 73 for people born between 1951 and 1959 and 75 for those born in 1960 or later.⁷ The investments keep growing tax-deferred in the meantime.

A spouse can also roll the assets into their own existing IRA or another eligible retirement plan. A spouse under 59½ who expects to need the money soon may instead keep the account titled as an inherited IRA, which allows withdrawals at any time without the 10 percent penalty.

Most Non-Spouse Beneficiaries: The 10-Year Rule

Most non-spouse beneficiaries who inherited an IRA after 2019 must empty the entire account by December 31 of the tenth year following the original owner’s death.⁷ The SECURE Act created this deadline in place of the older “stretch IRA” approach.

Within the 10 years, whether you owe annual minimum distributions depends on when the original owner died relative to their required beginning date. If they died before that date, you can withdraw any amount in any year as long as the balance hits zero by the deadline. If they died on or after that date, IRS regulations require annual minimum distributions in years one through nine, with whatever remains due in year 10.⁸ Those annual amounts are calculated using the beneficiary’s life expectancy, and the annual requirement took effect for calendar years starting January 1, 2025.

Eligible Designated Beneficiaries

A narrow group is exempt from the 10-year deadline and can still stretch distributions over their own life expectancy. The IRS recognizes these eligible designated beneficiaries:⁷

Surviving spouses.
Minor children of the deceased, until they reach the age of majority.
Disabled individuals as defined in the federal tax code.
Chronically ill individuals as defined in the federal tax code.
Beneficiaries not more than 10 years younger than the deceased.

The minor-child exception only covers the account owner’s own children, not grandchildren or other young relatives. Once a minor child reaches the age of majority, the 10-year clock starts, and the account must be fully distributed by December 31 of the year containing the 10th anniversary of that birthday.³

Strategies to Keep the Tax Bill Down

The biggest mistake beneficiaries make is taking the whole inherited IRA in one year. A lump sum stacks on top of your regular income and can move you from the 12 or 22 percent bracket well into the 32 or 35 percent range.¹ Spreading the withdrawals, especially into years when your other income is lower, keeps more of the money in lower brackets.

Before deciding on a distribution amount, project your total income for the year: wages, investment income, Social Security, everything. Add the planned IRA withdrawal on top. If the total tips into the next bracket, take less this year and more in a year when your income drops. Beneficiaries under the 10-year rule don’t have to wait until year 10; roughly equal annual withdrawals are often the most tax-efficient path.

Qualified Charitable Distributions

If you are at least 70½ and charitably inclined, you can send up to $111,000 per year from an inherited IRA directly to a qualifying charity. A qualified charitable distribution counts toward any required distribution you owe for the year but stays out of your taxable income.³ The money has to move directly from the IRA custodian to the charity. You cannot withdraw it first and then donate.

The Section 691(c) Deduction

When a large IRA is included in a decedent’s taxable estate, the money can be hit by both federal estate tax and beneficiary income tax. To offset the overlap, the tax code lets beneficiaries deduct the portion of federal estate tax attributable to the IRA.⁹ The deduction only applies when the estate was actually large enough to owe federal estate tax, which is a small share of estates. Where it does apply, it can meaningfully reduce the income tax owed on distributions.

Withholding and State Tax

When you take a distribution from an inherited IRA, the custodian withholds 10 percent for federal income tax unless you tell them otherwise.¹⁰ You can elect out of withholding or pick a higher rate. If you have significant other income and the true tax on the withdrawal will exceed 10 percent, either raise the withholding or make estimated tax payments so you don’t get hit with an underpayment penalty at filing.

State tax rules matter too. Most states tax inherited traditional IRA distributions as ordinary income, though a handful have no income tax at all. Check your state’s treatment before you plan the size of a withdrawal.

The Penalty for Missing a Required Distribution

Missing a required distribution triggers an excise tax of 25 percent on the amount you should have taken.⁷ The penalty drops to 10 percent if you correct the shortfall within two years. The same penalty applies if you fail to empty the account by the end of the 10-year window; the IRS treats the leftover balance as a missed distribution.

If you missed a distribution because of a genuine mistake, you can request a waiver by filing Form 5329 with a written explanation of the error and the steps you are taking to fix it.¹¹ Taking the missed distribution as soon as you catch the error strengthens the case for a waiver.

Reporting the Distribution on Your Tax Return

The IRA custodian sends you and the IRS a Form 1099-R for every year you take a distribution. Box 1 shows the gross amount, Box 2a shows the taxable amount, and Box 7 carries a distribution code; Code 4 signals a death benefit paid to a beneficiary.¹²

On Form 1040, Box 1 goes on Line 4a and Box 2a goes on Line 4b. If the whole distribution is taxable, which is the usual outcome for an inherited traditional IRA with no non-deductible basis, enter the amount only on Line 4b.¹³ If part of the distribution is tax-free, either because of non-deductible contributions or because the Roth qualifies, put the total on Line 4a and the smaller taxable amount on Line 4b. Mismatches between the 1099-R and the return often trigger automated IRS notices, so check the numbers before you file.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Internal Revenue Service. Retirement Topics – Beneficiary
3
Internal Revenue Service. Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)
4
Internal Revenue Service. Instructions for Form 8606
5
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
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Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
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Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
8
Federal Register. Required Minimum Distributions
9
Office of the Law Revision Counsel. 26 USC 691 – Recipients of Income in Respect of Decedents
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Office of the Law Revision Counsel. 26 USC 3405 – Special Rules for Pensions, Annuities, and Certain Other Deferred Income
11
Internal Revenue Service. Instructions for Form 5329
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Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
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Internal Revenue Service. Instructions for Form 1040