Inherited IRA tax rules control when you must withdraw money from an IRA you inherit and how those withdrawals are taxed. The answer depends on your beneficiary category and the account type. Most nonspouse beneficiaries must empty the account within 10 years, and some must also take required minimum distributions (RMDs) every year. Traditional IRA withdrawals are generally taxable, while inherited Roth IRA withdrawals are often tax-free.
Inheriting an IRA often happens during a difficult time, but some tax decisions can’t wait, so it helps to know where the rules come from: the SECURE Act, SECURE 2.0, and final IRS regulations that took effect in 2025. They apply to owners who died in 2020 or later; older inheritances follow earlier rules.
Two people can inherit accounts of the same size yet need very different plans. Treat this article as a map, then work through your own numbers with a financial planner from ARQ Wealth and a tax professional.
Your beneficiary type sets the rules
The IRS sets different deadlines for each group to empty the account. Find your group first, because almost every other tax rule for an inherited IRA follows from it.
Surviving spouses
A spouse has the most options. If you are the sole beneficiary, you can assume ownership of the IRA, including by rolling the funds into an existing IRA or a new IRA in your own name. The account then follows the owner’s rules, and RMDs begin based on your age: 73 for those born in 1951–1959 and 75 for those born in 1960 or later. Earlier birth cohorts had earlier starting ages.
Alternatively, you can keep the account as an inherited IRA and take distributions based on your life expectancy. If your spouse died before RMDs began, you can wait until the year your spouse would have reached RMD age.
Age matters in this decision. A 52-year-old widow who needs income may be better off keeping the inherited account for now, since inherited IRA withdrawals avoid the 10% early-withdrawal penalty. Once the funds are in her own IRA, withdrawals before age 59½ generally trigger that penalty. She can still roll it over later.
Eligible designated beneficiaries
Besides spouses, the IRS names four other types of eligible designated beneficiaries:
• Minor children of the account owner
• A person who is disabled
• A person who is chronically ill
• A person who is not more than 10 years younger than the owner, such as a sibling or partner
People in this group can stretch withdrawals over their life expectancy rather than emptying the account within 10 years. The minor child exception is temporary and applies only to the owner’s children, not grandchildren. Under the final regulations, the 10-year clock starts when the child turns 21.
Nonspouse designated beneficiaries
This group includes most adult children, grandchildren, other relatives, and friends. These non-eligible designated beneficiaries must fully distribute the inherited IRA within 10 years.
Estates, charities, and some trusts are non-designated beneficiaries, so they follow older rules that can require emptying the account in as little as five years. If a trust is the beneficiary, consult an estate attorney before withdrawing any funds.
How the 10-year rule works
Under the 10-year rule, you must fully distribute the inherited IRA by December 31 of the tenth year after the original owner’s death. If your mother died in 2025, your deadline is December 31, 2035.
Whether you must also take a withdrawal each year depends on one fact: did the owner die before or after reaching the “required beginning date”? For an IRA owner born in 1951–1959, that date is April 1 of the year after the owner turns 73. Earlier birth cohorts had earlier starting ages; those born in 1960 or later start at 75.
• Owner died before that date. No annual withdrawals are required, as long as the account is empty by the end of year 10.
• Owner died on or after that date. You must take an RMD each year from years 1 through 9, based on your life expectancy, and empty the account by the end of year 10.
The second rule confused many people, so the IRS waived penalties for missed annual RMDs from 2021 through 2024. Annual RMDs have been required since 2025. A missed RMD carries a 25% excise tax on the amount you should have taken, which can drop to 10% if you fix the mistake in time.
Dana’s father died at 80, well past his required beginning date. The following year, Dana turns 53, and the inherited traditional IRA held $400,000 on December 31. The IRS Single Life Expectancy Table gives a factor of 33.4 at age 53, so her first RMD is $400,000 divided by 33.4, or about $11,976. Each year after, she subtracts one from the factor and divides again.
That number is small. If Dana takes only the minimum, most of the account will remain in year 10 and be taxed all at once. The required minimum distribution is a floor. For many people, it should not be the plan.
Two early tasks: the final RMD and separate accounts
Two jobs come up soon after the owner’s death.
The decedent’s final RMD
If the owner was due an RMD for the year of death and had not taken all of it, the beneficiaries must take the rest. That money is taxed to whoever receives it, not on the owner’s final tax return.
When there are several beneficiaries, the final regulations allow any one of them to take the full amount. The IRS also provides extra time: the excise tax is automatically waived if the final RMD is taken by the later of the beneficiary’s tax filing deadline for the year of death or the end of the following year. That helps when someone dies in December.
Separate inherited accounts
When several people inherit one IRA, each should usually move their share into a separate inherited IRA by December 31 of the year after the death. Splitting lets each person follow their own rules. A sister close in age to the owner can stretch withdrawals over her lifetime, while an adult son uses the 10-year rule. Without splitting, the whole group must follow the least favorable schedule.
A non-spouse beneficiary must move the funds by direct trustee-to-trustee transfer into an account titled as an inherited IRA, such as “Robert Lee, deceased, IRA for the benefit of Dana Lee.” Nonspouse heirs cannot use a 60-day rollover, so a check made out to you is a taxable withdrawal you cannot put back. You also cannot contribute your own funds to an inherited IRA.
How withdrawals are taxed
The tax you owe depends on the type of account you inherit.
Inherited traditional IRA tax rules
Money withdrawn from an inherited traditional IRA is treated as ordinary income and taxed at the same rates as a paycheck. Lower capital gains rates do not apply, and the investments do not receive a stepped-up cost basis like inherited stocks in a brokerage account. If the owner made after-tax contributions, part of each withdrawal is tax-free, and you track it on IRS Form 8606. Your state may also tax the withdrawal.
Inherited Roth IRA tax rules
A nonspouse Roth IRA beneficiary who is subject to the 10-year rule has two advantages. First, there are no annual RMDs in years one through nine because Roth owners never have a required beginning date. Second, withdrawals are usually tax-free. Contributions always are, and earnings are tax-free as qualified withdrawals once five years have passed since the owner first funded a Roth IRA. If the Roth is newer than that, earnings withdrawn early may be taxed.
Because Roth growth is tax-free, many heirs wait until near the end of year 10 to empty it. A surviving spouse can treat an inherited Roth as their own and never take RMDs from it.
Withholding
For nonperiodic IRA distributions, federal withholding is generally 10% by default; Form W-4R usually lets you elect a different rate from 0% to 100%. Periodic payments use different withholding rules. Ten percent is often too little for someone in the 22% or 24% bracket. Withholding is treated as paid evenly throughout the year, so withholding more from a late-year withdrawal can help you avoid an underpayment penalty.
No 10% early-withdrawal penalty
Withdrawals made after the owner’s death are exempt from the 10% additional tax on early distributions. A 30-year-old heir owes income tax on a traditional IRA withdrawal, but no penalty. The catch, described earlier: a spouse who treats the account as their own gives up this exception.
Four withdrawal strategies compared
Once you know your deadline, these four approaches cover most timing decisions, and many people blend them.
| Strategy | How it works | Tends to fit | Main drawback |
| Lump sum | Withdraw everything in one year | Small accounts, a low-income year, an urgent need for cash | Stacks all the income into one year at higher rates |
| Annual (even) withdrawals | Take roughly one-tenth each year | Steady income | Ignores years when your tax rate is lower or higher |
| Bracket-filling | Withdraw up to the top of a chosen tax bracket each year | Income that changes, such as before and after retirement | Needs a fresh tax projection every year |
| Charitable | Send IRA money to charity | People age 70½ or older who already give | Only helps if you plan to give anyway |
Lump sum versus annual withdrawals
Consider a single filer with $95,000 in taxable income who inherits a $400,000 traditional IRA. Using 2026 federal brackets and ignoring investment growth and state taxes:
• Lump sum: taxable income jumps to $495,000, reaching the 35% bracket. The withdrawal adds about $126,400 in federal tax.
• Even withdrawals: $40,000 a year raises taxable income to $135,000, reaching the 24% bracket, and adds about $9,400 in federal taxes per year, or roughly $93,900 over 10 years.
Spreading withdrawals across the 10-year window saves about $32,500 in this example. Actual results will vary as the account grows and brackets change, but the direction is typical for a large traditional IRA. A lump sum makes more sense when the account is small, or the cash addresses a bigger problem, such as paying off high-interest debt.
Bracket-filling
Bracket-filling means withdrawing up to the top of a tax bracket you are comfortable with. Suppose a married couple expects $70,000 in taxable income in 2026. The 12% bracket for joint filers ends at $100,800, so they could withdraw about $30,800 from an inherited traditional IRA and pay 12% on the full amount.
This works best when your income fluctuates. Someone planning to retire in four years might take only the required amount now and larger amounts after paychecks stop. Someone who has already retired but has not yet started Social Security might do the opposite.
Charitable strategies
A beneficiary who is 70½ or older can make a qualified charitable distribution (QCD) from an inherited IRA. The funds go directly to a public charity, count toward the RMD, and never appear in your income. The 2026 limit is $111,000 per person, and QCDs cannot be made to donor-advised funds.
Younger beneficiaries can withdraw funds, donate cash, and claim a deduction, but the withdrawal increases their income first. Starting in 2026, people who itemize cannot deduct the first 0.5% of their income given, and people who take the standard deduction can deduct up to $1,000 of cash gifts, or $2,000 on a joint return.
Medicare IRMAA and other costs tied to your income
The highest income-linked cost for retirees is Medicare’s income-related monthly adjustment amount (IRMAA). In 2026, the standard Part B premium is $202.90 per month. In the first surcharge tier, a single filer with modified AGI above $109,000 through $137,000, or a joint-filing couple above $218,000 through $274,000, pays $284.10 for Part B plus a $14.50 Part D surcharge. That is about $1,148 more per person per year, and the top-tier Part B premium is $689.90 a month.
IRMAA works like a cliff: one dollar over a threshold triggers the full surcharge for the year. It also looks back two years, so a large withdrawal in 2026 raises premiums in 2028.
Higher income from an inherited IRA withdrawal can also change:
• How much of your Social Security benefit is taxed
• The $6,000 deduction for people 65 and older (2025 through 2028), which starts shrinking above $75,000 of income for single filers and $150,000 for couples
• Premium tax credits for marketplace health insurance before age 65
• The 3.8% net investment income tax on other investment income if the withdrawal pushes modified AGI over $200,000 (single) or $250,000 (joint); the IRA withdrawal itself is excluded from net investment income
• Whether your long-term capital gains qualify for the 0% rate
Tax-free withdrawals from an inherited Roth IRA do not count toward any of these, which is another reason traditional and Roth accounts call for different timing.
Build the plan around your goals
The tax rules for inherited IRA accounts are the same for everyone in a given group, but the right withdrawal plan is personal. It depends on your current and future income, your other savings, your health coverage, and what you want the money to do.
ARQ Wealth is a fee-only fiduciary firm. Our clients pay us directly for advice; we do not earn commissions on product sales, and we are legally required to put your interests first. That matters with an inherited IRA because the best answer is sometimes to do very little this year, and no one at our firm is paid more for moving your money (however, to provide our services, accounts may need to be transferred to custodians we work with).
When we work with a beneficiary, we project taxes year by year, test withdrawal schedules, and compare each against Medicare premiums and the other thresholds. We also coordinate with your CPA or tax preparer so the plan and the tax return align.
If you have inherited an IRA or expect to, bring your questions to a financial advisor and tax professional before the first withdrawal. Some choices, such as a spousal rollover or a check paid to a nonspouse heir, cannot be undone. For a second set of eyes, contact ARQ Wealth to talk through your situation.