Inherited IRA Tax Rules: RMDs, 10-Year Rule, and Beneficiaries

Money you pull from an inherited traditional IRA is taxed as ordinary income in the year you receive it, at federal rates from 10% to 37% depending on your total taxable income.¹ Money from an inherited Roth IRA is generally tax-free. What changed after the SECURE Act took effect in 2020 is the timeline: if you are not a spouse or one of a few other protected categories, you now have to empty the account within ten years of the original owner’s death, and getting this wrong triggers a 25% excise tax on whatever you should have withdrawn.

The inherited IRA tax rules turn on three things: whether the account is a traditional or Roth IRA, your relationship to the person who died, and whether the original owner had already started taking required minimum distributions. Once you know those three facts, the rest of the analysis follows.

How Traditional Inherited IRA Withdrawals Are Taxed

Every dollar you withdraw from an inherited traditional IRA is ordinary income for the year you receive it. For 2026, federal rates run from 10% on the first $12,400 of taxable income for a single filer up to 37% on income above $640,600.¹ The custodian reports each year’s distributions on Form 1099-R, which goes to you and to the IRS.²

One protection applies regardless of your age. Distributions from an inherited IRA are never subject to the 10% early withdrawal penalty, because federal law carves out an explicit exception for any payment made to a beneficiary after the owner’s death.³ A 35-year-old who inherits an IRA can pull funds immediately without the extra 10%. Regular income tax still applies.

If the original owner made nondeductible (after-tax) contributions, part of each distribution is not taxed again. You calculate it as the ratio of the owner’s after-tax basis to the total account balance, and every withdrawal contains a proportional mix of taxable and nontaxable money. You cannot pull the nontaxable portion first. When there is basis in the account, you file Form 8606 with your return to track what has already been taxed.⁴

The single biggest mistake is taking too much in one year. A $500,000 lump sum from a traditional inherited IRA can push you into the 32% or 35% bracket for that year alone. You can take a lump sum at any time,⁵ but spreading distributions across multiple years usually keeps more of the money in lower brackets.

How Inherited Roth IRA Withdrawals Are Taxed

Distributions from an inherited Roth IRA are generally tax-free because the original owner funded the account with after-tax money. Contributions and earnings both come out free of federal income tax as long as the account satisfies the five-year holding requirement.⁶

The five-year clock starts on January 1 of the year the original owner first contributed to any Roth IRA, and it does not reset when you inherit. If your parent opened their first Roth in 2018 and died in 2025, the five years were satisfied in 2023, and every distribution to you is tax-free. If the account was less than five years old at death, contributions still come out tax-free, but earnings are taxable until the five-year mark is reached.⁶ IRS ordering rules treat contributions as coming out before earnings, so most Roth beneficiaries can access the bulk of the balance without tax even during that short window.

Verify the original account opening date with the custodian early. Every withdrawal’s tax treatment hinges on it. And you still report Roth distributions on your federal return even when they are not taxable, so the IRS can confirm the treatment.

The Ten-Year Rule for Most Non-Spouse Beneficiaries

If you inherited an IRA from someone who died after December 31, 2019, and you are not in one of the protected categories described below, you must withdraw the entire balance by December 31 of the tenth year following the year of death.⁵ This rule replaced the old “stretch IRA” strategy and applies to adult children, grandchildren, friends, and most other individual beneficiaries.

Whether you also owe annual distributions during those ten years depends on one question: had the original owner already started required minimum distributions when they died? Their required beginning date is April 1 of the year after they turn 73.

If the owner died before their required beginning date, you have full flexibility. Take nothing for nine years and empty it in year ten, or spread it however you want.
If the owner died on or after their required beginning date, you must take annual RMDs in years one through nine and clear the remaining balance by the end of year ten. The annual amount is calculated using your single life expectancy from Table I in IRS Publication 590-B.⁷⁸

This is where most people get tripped up. The IRS waived penalties for missed annual RMDs from 2020 through 2024 while final regulations were being written. That grace period is over. Starting in 2025, the annual distribution requirement inside the ten-year window is fully enforceable.⁷

Even when the rules allow you to defer all withdrawals to year ten, doing so is often the wrong tax move for a traditional IRA. Cramming a decade of distributions into a single year can spike your top bracket. Voluntary distributions across the ten years usually cost less overall. For an inherited Roth, the opposite logic often applies: the funds grow tax-free, so waiting until year ten maximizes the shelter.

Spouse’s Options

Surviving spouses have the widest range of choices, and no other category comes close.

You can roll the inherited funds into your own IRA. Federal law lets a surviving spouse transfer the balance into their own retirement account, either through a direct trustee-to-trustee transfer or by completing the move within 60 days of receiving the funds.⁹ Non-spouse beneficiaries cannot do this.¹⁰ Once you treat the account as your own, you delay your RMDs until age 73.¹¹ The trade-off: withdrawals before age 59½ from your own IRA do trigger the 10% early withdrawal penalty.

You can also keep the account as an inherited IRA. This makes sense if you are younger than 59½ and might need the funds. Because inherited-IRA distributions are always penalty-free regardless of age,⁵ a younger surviving spouse can avoid the 10% hit by staying in beneficiary status and rolling into their own IRA later, after passing 59½.

Whether you are the sole beneficiary must be finalized by September 30 of the year after the account owner’s death.⁵ Other beneficiaries can disclaim or cash out before then so the spouse is treated as sole beneficiary for distribution purposes.

Who Can Still Stretch Distributions

Five categories of “eligible designated beneficiaries” are exempt from the ten-year rule and can take distributions over their own life expectancy, using the Single Life Expectancy Table in IRS Publication 590-B:¹²⁸

Surviving spouses, as described above.
Minor children of the account owner. They take life-expectancy distributions until the age of majority; once the child turns 21, the ten-year clock starts, so the account must be empty by age 31. This applies only to the owner’s own children, not grandchildren or other minor relatives.⁵
Disabled individuals, meaning unable to engage in substantial gainful activity because of a medically determinable impairment expected to last at least a year or lead to death.¹²
Chronically ill individuals, certified as unable to perform at least two activities of daily living, with an illness expected to be lengthy in nature.¹²
Individuals not more than ten years younger than the deceased, such as a close-in-age sibling or an older friend.

Estates, Trusts, and Successor Beneficiaries

The rules shift if the account owner never named an individual beneficiary or if a trust or later beneficiary is involved.

When the estate is the beneficiary, or no beneficiary was named, there is no individual life expectancy to work with. If the owner died before the required beginning date, the account must be fully distributed by December 31 of the fifth year after the year of death. If the owner died on or after that date, distributions come out over the owner’s remaining life expectancy, calculated as if they were still alive and reduced by one year each year. Both outcomes are worse than what a named individual beneficiary gets.

When a trust is the beneficiary, the analysis is more complicated. A trust that meets IRS “see-through” requirements passes distribution treatment through to its individual beneficiaries; a trust that does not is treated like an estate. See-through status requires that the trust be valid under state law, irrevocable at the owner’s death, have identifiable beneficiaries, and that a copy of the trust document reach the IRA custodian by October 31 of the year after death. If you are dealing with a trust beneficiary, get the trust documents reviewed by counsel before taking any distributions, because trust tax rates hit the top 37% bracket at roughly $15,000 of income.

Successor beneficiaries, meaning people who inherit an already-inherited IRA, do not get a fresh ten-year window. You are bound by the time remaining on the first beneficiary’s schedule. If the first beneficiary was four years in, you get six years. If the first beneficiary was an eligible designated beneficiary using life-expectancy distributions, their death triggers the ten-year rule for you, measured from their date of death. Confirm the exact deadline with the custodian before planning any withdrawals.

Penalties for Missing a Distribution

Missing a required distribution triggers a 25% excise tax on the amount you should have withdrawn. Miss a $20,000 RMD and you owe a $5,000 penalty on top of the income tax still due when you eventually take the money.

SECURE 2.0 added a safety valve. If you correct the missed distribution and file Form 5329 within two years, the penalty drops to 10%. You take the missed amount as soon as you catch the error and file the form with your return for the correction year.

For beneficiaries under the ten-year rule, the same 25% excise tax applies to whatever balance remains on December 31 of the tenth year. On $300,000, that is a $75,000 penalty, and you still owe income tax on the full distribution. The day you inherit the account, put the tenth-year deadline on your calendar.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
2
Internal Revenue Service. Instructions for Forms 1099-R and 5498
3
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
4
Internal Revenue Service. 2025 Instructions for Form 8606
5
Internal Revenue Service. Retirement Topics – Beneficiary
6
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
7
Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions
8
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements
9
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
10
Legal Information Institute. 26 USC 408 – Individual Retirement Accounts
11
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
12
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans