IRS Inherited IRA Rules: 10-Year Rule, RMDs, and Taxes

If you have inherited an IRA, the rules governing your withdrawals depend on who you are to the deceased and when they died. Most non-spouse beneficiaries of owners who died in 2020 or later must empty the account within 10 years, distributions from a traditional inherited IRA are taxed as ordinary income in the year you take them, and missing a required distribution triggers a 25% excise tax on the shortfall.¹² Spouses have separate, more generous options. The details below walk through each situation.

First Steps After Inheriting

The account has to be retitled to reflect the inheritance, using a format like “Jane Smith as beneficiary of John Smith, deceased.” Do not merge the money into an IRA you already own. Move the funds through a trustee-to-trustee transfer, where the money goes directly from one custodian to another. Non-spouse beneficiaries cannot use a standard 60-day rollover. If you take a check, the whole amount becomes taxable income and cannot be redeposited into an inherited IRA.

Check one thing immediately: did the original owner already start taking required minimum distributions, and did they finish that year’s amount before dying? If they were subject to RMDs and hadn’t yet withdrawn the full amount for the year of death, you are responsible for completing it. This year-of-death RMD is calculated on the amount the owner owed and is separate from whatever schedule applies to you going forward.³ Missing it is one of the most common early errors.

Options if You Are the Surviving Spouse

Spouses get flexibility no other beneficiary has. Three paths exist, and the right one depends on your age, whether you need the money, and how old your spouse was.

Roll the money into your own IRA. The inherited assets merge with your personal retirement savings and follow your own RMD schedule. You will not owe RMDs until you reach age 73, or 75 if you were born in 1960 or later.¹ This is the longest tax-deferred stretch available and works best when you don’t need current income.

Keep the account as an inherited IRA. Distributions are calculated on your life expectancy, with annual RMDs starting either the year after death or the year your spouse would have turned 73, whichever is later. This is often the better move if you are under 59½ and need access to the funds, because inherited IRA distributions escape the 10% early withdrawal penalty.¹

Disclaim the inheritance. If you would rather the account pass to the contingent beneficiary, you can file a qualified disclaimer within nine months of the owner’s death. It must be in writing, and you cannot have accepted any benefit from the account. Once you disclaim, the assets pass as though you were never named.⁴ Taking a single distribution or exercising any control over the account ends the disclaimer option.

The rollover is exclusive to spouses. No other beneficiary can convert an inherited IRA into a personal account and reset the clock.

The 10-Year Rule for Everyone Else

For deaths in 2020 or later, most non-spouse beneficiaries must withdraw the entire balance within 10 years. The clock starts the year after death, and by December 31 of the tenth year the account must be at zero.¹

Five categories of “eligible designated beneficiaries” can still use the old life-expectancy stretch instead:

A surviving spouse
A disabled individual
A chronically ill individual
An individual not more than 10 years younger than the deceased
A minor child of the deceased, until reaching age 21

Eligible designated beneficiaries take annual distributions based on their own life expectancy, potentially stretching the account over decades.¹ Adult children, grandchildren, friends, and siblings do not qualify. They are on the 10-year rule.

The minor-child exception applies only to children of the deceased, not grandchildren or other minors. Once that child turns 21, the 10-year clock starts and the remaining balance must come out over the next decade. A grandchild who inherits directly is on the 10-year rule from day one, regardless of age.

If the IRA was left to an estate, a charity, or a trust that does not qualify as a “see-through” trust, there is no designated beneficiary for distribution purposes, and faster distribution timelines usually apply. Charities themselves owe no income tax on what they receive, so naming a charity is a clean way to direct retirement money to a tax-exempt organization without the income tax an individual heir would face.

Do You Also Owe Annual RMDs Within the 10 Years?

This turns on a single question: did the owner die before or after their Required Beginning Date? For 2026, the RBD is April 1 of the year after the owner turned 73.

If the owner died on or after the RBD, you must take annual RMDs in years one through nine and clear whatever is left in year 10. The annual amount is the prior year-end balance divided by the applicable factor from the IRS Single Life Expectancy Table. That factor decreases each year, so the required withdrawals grow.³

If the owner died before the RBD, no annual distributions are required during the 10 years. You could technically leave the money untouched for nine years and take it all in year 10, though for tax reasons that is rarely the right move.

Eligible designated beneficiaries on the life-expectancy stretch use the same calculation, just spread over their full life expectancy rather than capped at 10 years.

How the Withdrawals Are Taxed

Distributions from an inherited traditional IRA are taxed as ordinary income in the year received. A large withdrawal stacks on top of your salary and can push you into a higher bracket.

If the original owner made non-deductible contributions, the account has a basis, and a proportional share of each distribution attributable to that basis comes out tax-free. In that case, or when you take a non-qualified distribution from an inherited Roth, you file IRS Form 8606 with your return. Skipping the form when it is required carries a $50 penalty.⁵

Inherited Roth IRAs are treated more favorably. If the original owner first contributed to any Roth IRA at least five years before the distribution, withdrawals are generally tax-free, both contributions and earnings. If the five-year clock has not been met, contributions still come out tax-free but earnings may be taxable.¹

One point that surprises people: inherited Roth IRAs are still subject to the 10-year distribution rule for non-eligible designated beneficiaries. The money comes out tax-free, but it still has to come out on schedule, and missing the deadline triggers the same penalty as with a traditional account.¹

Regardless of account type, inherited IRA distributions are exempt from the 10% early withdrawal penalty that normally applies before age 59½.⁶ State income tax may also apply to traditional IRA distributions. Most states treat them as ordinary income; a handful have no income tax. Factor your state into your planning.

Spreading the Withdrawals to Lower Your Total Tax

When the owner died before their RBD, you control the timing entirely within the 10 years. When annual RMDs are required, you can still take more than the minimum in lower-income years. The difference between a thoughtful plan and dumping everything out in year 10 can easily reach five figures in unnecessary taxes.

For 2026, single-filer brackets start at 10% on the first $12,400 and top out at 37% on income above $640,600.⁷ The practical goal is to pull enough from the inherited IRA each year to fill your current bracket without spilling into the next. If you are in the 22% bracket with room before the 24% threshold at $105,700, withdrawing up to that gap and stopping produces the most efficient outcome for that year.

Roughly equal annual withdrawals tend to produce the lowest total tax over the decade. Divide the current balance by the number of years remaining, take that amount, and adjust each year as the investments grow or shrink. Waiting until year 10 concentrates a decade of investment growth into one tax year. On a $500,000 inherited IRA, that lump-sum approach can easily cost $50,000 or more in additional federal tax compared with spreading the distributions evenly.

What Happens if You Miss a Distribution

Missing a required distribution triggers a 25% excise tax on the shortfall, meaning the difference between what you should have withdrawn and what you actually took. Before 2023 this penalty was 50%; SECURE 2.0 cut it.²

Fix the mistake within two years and the penalty drops to 10%. Fixing means taking the missed distribution and filing Form 5329 with the federal tax return for the year the RMD was originally due.² Even at the reduced 25% rate, missing a $50,000 RMD costs $12,500. Calendar the deadlines and set up automatic distributions if your custodian offers them.

Situations That Need Extra Attention

A few scenarios sit outside the standard rules and are worth flagging.

If a trust is named as beneficiary. The trust must meet four requirements to be treated as a “see-through” trust and preserve access to the 10-year rule or the life-expectancy stretch: it must be valid under state law, become irrevocable at the owner’s death, have identifiable individual beneficiaries, and its documentation must reach the IRA custodian.⁸ Trust income tax brackets are severely compressed. In 2026, trust income above just $16,000 is taxed at 37%, the same rate that does not apply to an individual until income exceeds $640,600.⁹ If the trust accumulates distributions rather than passing them through, that compression gets expensive fast. Get a specialist involved before relying on a trust structure.

If you die before emptying the account. Your own beneficiary steps into the distribution timeline. If you were an eligible designated beneficiary using the life-expectancy stretch, your successor gets a fresh 10 years measured from your death. If you were already on the 10-year clock as a non-eligible designated beneficiary, your successor inherits your remaining deadline rather than a new one.¹

If the estate owed federal estate tax. You may be entitled to an “income in respect of a decedent” deduction for the portion of estate tax attributable to the IRA, claimed proportionally as you take distributions.¹⁰ With the federal estate tax exemption at $15 million per person for 2026, this applies only to beneficiaries of very large estates, but where it applies it can offset a meaningful share of the income tax on your withdrawals. A tax professional can run the calculation from the decedent’s Form 706.

1
Internal Revenue Service. Retirement Topics – Beneficiary
2
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
3
Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
4
eCFR. 26 CFR 25.2518-2 – Requirements for a Qualified Disclaimer
5
Internal Revenue Service. 2025 Instructions for Form 8606 – Nondeductible IRAs
6
Internal Revenue Service. Certain Exceptions to the 10 Percent Additional Tax Under Code Section 72(t)
7
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
8
Internal Revenue Service. Internal Revenue Bulletin 2024-33
9
Internal Revenue Service. 2026 Form 1041-ES
10
Office of the Law Revision Counsel. 26 US Code 691 – Recipients of Income in Respect of Decedents