Inherited IRA Rules: The 10-Year Deadline, Annual RMDs and the Tax on $300,000

Michael Whitman · Trading since 2017, full-time since 2020 · YouTube creator, 137K subscribers · Published 2026-11-07

An inherited IRA is an account kept in a dead owner’s name for a beneficiary, and most beneficiaries other than a spouse must empty it by 31 December of the tenth year after the death. If the owner had already started required distributions, a minimum withdrawal is also due every year in between.

That second rule is the one most people miss, and the IRS spent four years waiving the penalty for missing it. From 2025 the waiver is over. This page sets out who falls under which rule and then prices the federal tax on a $300,000 account taken out three different ways.

How it works

The account stays an IRA, but you can never add to it. Publication 590-B says a non-spouse beneficiary cannot treat the account as their own, cannot contribute to it and cannot roll money in or out. It can move only by a trustee-to-trustee transfer to another IRA kept in the dead owner’s name for your benefit. A check made out to you is a distribution, and the IRA rollover rules do not rescue it.

Who counts as eligible. The eligible designated beneficiaries are the owner’s surviving spouse, the owner’s minor child, a disabled person, a chronically ill person, and anyone not more than 10 years younger than the owner. The final regulations set the age of majority at the 21st birthday, after which a child’s 10-year clock starts.

The required beginning date is the test. For an owner who reached 72 after 2022, it is 1 April of the year after turning 73. An owner who died on or after that date was already taking distributions, and the Treasury preamble to the July 2024 rules says annual distributions must continue while the account is also emptied by the end of year 10.

How the annual minimum is set. Look up your age in the year after the death on the IRS Single Life Table, then take one off for each later year. The minimum is the prior 31 December balance divided by that number.

No early-withdrawal penalty. Pub 590-B says distributions to a beneficiary escape the 10% additional tax even before 59½. A spouse who elects to treat the account as their own loses that and is under the normal rules again.

Spouses get more choices. A sole spouse beneficiary can treat the IRA as their own, roll it into their own IRA, or keep it as an inherited account. Not taking a required beneficiary distribution can itself count as choosing to treat it as yours.

Roth accounts. A Roth owner is treated as dying before the required beginning date, so a non-spouse beneficiary has no annual minimum and must empty the account by year 10. Qualified withdrawals are tax-free, which is the subject of the Roth IRA page.

A worked example: $300,000, three ways out

This is a labeled example. A parent aged 78, already past the required beginning date, dies in 2025 and leaves a $300,000 traditional IRA to a 50-year-old child. The child files single, earns $70,000 in wages and takes the 2026 standard deduction of $16,100, so $53,900 is taxable before any withdrawal. The 2026 brackets from Rev. Proc. 2025-32 are held flat to 2035, the account does not grow, and only federal income tax is counted.

The minimum each year. The Table I divisor at age 50 is 36.2, so the 2026 minimum is $300,000 / 36.2 = $8,287.29. Next year the divisor is 35.2 and the balance is $291,712.71, which divides to the same $8,287.29; with no growth it stays the same every year to 2034.

Even tenths win because every dollar stays in the 22% bracket. $53,900 plus $30,000 is $83,900, well under the $105,700 line where 24% starts, so each year adds exactly $6,600.00. The minimum-only path pays 22% for nine years and then stacks $225,414.36 into a single year, where the top slice is taxed at 35%.

Waiting is not even an option for this child. Because the parent died after the required beginning date, the last row would miss nine annual minimums. It is shown because it is the default for a Roth or for an owner who died before that date.

The original data

Run the same example with the account growing 5% a year. Even tenths take out $377,336.78 and pay $83,014.09 of extra federal tax, 22.00% of the money withdrawn. Minimum-only takes out $441,072.03 and pays $123,560.01, 28.01%. Waiting until 2035, where allowed, takes out $465,398.46 and pays $143,953.71, 30.93%. Growth makes the late paths larger, but the bracket each dollar lands in still decides the bill. The year-by-year rows for both runs are in the inherited IRA tax CSV.

The annual minimum depends almost entirely on your age. On Table I of Publication 590-B, the first-year minimum is 1.81% of the balance at age 30, 2.76% at 50 and 5.32% at 70, because the divisors are 55.3, 36.2 and 18.8. A younger beneficiary is forced to take very little before year 10, which is exactly why a minimum-only plan leaves the biggest lump at the end. All 101 ages are in the Single Life Table CSV.

Read the two charts together. The first shows what bunching costs. The second shows how little the annual rule forces out before the deadline. A 30-year-old heir must take less than 2% in year one. So the spreading has to be chosen, not left to the rule.

The penalty, the waivers and the 2025 switch

The excise tax is 25% of what you failed to take. Section 4974 of the tax code sets it at 25% of the shortfall and cuts it to 10% if you take the missed amount and file a return showing the tax within the correction window. In the example, missing the 2026 minimum of $8,287.29 costs $2,071.82, or $828.73 if corrected in time. Leaving money in after year 10 is a shortfall too.

Why so many beneficiaries skipped the annual amounts. The SECURE Act’s 10-year rule applied to deaths from 2020, and many heirs read it as a single deadline. The IRS proposed the annual requirement in 2022, then issued Notice 2022-53 waiving the excise on those amounts for 2021 and 2022, Notice 2023-54 for 2023 and Notice 2024-35 for 2024, each covering beneficiaries of owners who had died since 2020 on or after their required beginning date.

The final regulations closed the gap. T.D. 10001, published 19 Jul 2024, applies to required distributions for calendar years from 1 Jan 2025. The Treasury preamble says commenters asked for the annual rule to be dropped, and that Treasury and the IRS “do not think that the commenters’ interpretation is consistent with a plain reading of the statute.” So 2025 was the first year the annual minimum carried the penalty.

The deadline did not move. Pub 590-B’s own example: an owner who died in 2025 leaves an account that must be empty by 31 Dec 2035. An owner who died in 2020 leaves one due by 31 Dec 2030.

Opening one, with Fidelity as the example

The account is opened at the firm that will hold it, by the beneficiary. Fidelity’s inherited IRA page, read 7 Nov 2026, lists $0 account fees and a $0 minimum for its retail IRAs, with fund expenses and commissions still possible, and asks beneficiaries to open an inherited IRA of the same type as the original, Roth or traditional. This is an example of one published fee line, not a recommendation.

What you will be asked for. A death certificate, your own identification, and the account details. The title carries both names, the deceased owner and you as beneficiary; a 2019 reply on the IRA Help forum about Fidelity titling says the IRS only needs both named. If the owner died after the required beginning date without taking that year’s minimum, you take it. The final regulations waive the 25% if it is out by the later of your tax-filing deadline for the year of death or the end of the following year: for the example’s 2025 death, 31 Dec 2026.

When it fails

The common failure is a missed annual minimum. From 2025 there is no waiver, and the 25% applies to each year’s shortfall.

The expensive failure is bunching. In the example, the gap between even tenths and one lump sum is $20,064.25 of federal tax, before state tax and before any effect a large income year has on other benefits.

The irreversible failure is a cash-out meant as a move. A check payable to a non-spouse beneficiary cannot be rolled over, so the whole balance becomes income in that year.

The quiet failure is the wrong category. A beneficiary not more than 10 years younger than the owner is an eligible designated beneficiary and can stretch payments, while a 25-year-old child cannot.

Questions people ask

Do I have to take money out of an inherited IRA every year?

Only if the owner died on or after the required beginning date and you are not using life-expectancy payments. Otherwise the only deadline is 31 December of year 10.

Can I roll an inherited IRA into my own IRA?

Only a spouse can. Anyone else must keep it as an inherited IRA and move it by trustee-to-trustee transfer.

Is an inherited Roth IRA taxed?

Qualified withdrawals are not. The account must still be empty by the end of year 10 for a non-spouse beneficiary, with no annual minimum.

What happens if I miss the 10-year deadline?

What is left after 31 December of year 10 is a shortfall under section 4974, taxed at 25%, or 10% if corrected within the window.

Related

The traditional IRA page covers the tax treatment every withdrawal above follows, and the Roth IRA page the tax-free version. IRA rollovers explains the direct transfer that is the only safe way to move an inherited account, and withdrawal strategy covers spreading taxable income across years in retirement.

This page is educational, not financial advice. Test every idea on your own charts before risking money.