Tax on inherited retirement accounts is one of the first money questions families face after a loss. Maybe you just learned you are the beneficiary of a parent’s IRA or 401(k). Or maybe you are planning ahead and want your children to keep as much as possible. Here is the short answer.
In most cases, you do pay income tax when you take money out of a traditional account. However, you usually do not owe tax just for inheriting it. Timing matters a great deal. This guide walks through the federal rules, the deadlines, and the few states that add their own tax.
How Tax on Inherited Retirement Accounts Works
A traditional IRA or 401(k) holds money that has never been taxed. The person who saved it got a tax break when they put it in. As a result, the IRS collects the tax later, when money comes out. That rule does not end at death. It passes to you, the beneficiary. A beneficiary is the person named on the account’s beneficiary form.
So the tax on inherited retirement accounts is regular income tax, not a special “inheritance” tax. Each withdrawal is added to your income for that year. It is taxed at your own federal rate, which ranges from 10% to 37%. The account company reports withdrawals on Form 1099-R. There is good news, too. The usual 10% early-withdrawal penalty does not apply to inherited accounts, even if you are under 59½.
Roth accounts work differently. Roth money was taxed before it went in. Typically, withdrawals from an inherited Roth IRA are tax-free if the account was open at least five years. You still must follow the timing rules, though. The IRS explains these rules in IRS Publication 590-B.
The 10-Year Rule, Deadlines, and Key Figures
The SECURE Act changed the rules for deaths after December 31, 2019. Most beneficiaries who are not spouses must now empty the account within 10 years. The deadline is December 31 of the 10th year after the death. For example, if your mother died in March 2026, the account must be empty by December 31, 2036.
The timing rules are where tax on inherited retirement accounts can get costly. Under the IRS final regulations (T.D. 10001), which took effect in 2025, the owner’s age matters. If the owner had already started required minimum distributions, you must also take a yearly minimum in years 1 through 9. A required minimum distribution, or RMD, is the smallest amount the law says you must withdraw each year. The IRS waived penalties for missed yearly amounts from 2021 through 2024. However, that relief has now ended.
Some people get more flexible rules. The law calls them “eligible designated beneficiaries.” They include a surviving spouse and the owner’s minor child until age 21. They also include a disabled or chronically ill person and anyone not more than 10 years younger than the owner. In most cases, they can spread withdrawals over their own lifetime.
| Rule | Exact Figure |
|---|---|
| Deadline to empty most inherited accounts | December 31 of the 10th year after death |
| When yearly RMDs are also required | If the owner died on or after their RMD start date |
| Owner’s RMD starting age | 73 (born 1951–1959); 75 (born 1960 or later) |
| Penalty for a missed RMD | 25%, or 10% if corrected in time |
| 10% early-withdrawal penalty | Does not apply to beneficiaries |
| Minor child moves to 10-year rule | Age 21 |
| Federal estate tax exemption (2026) | $15 million per person |
You can find more detail on the IRS required minimum distribution FAQs page.
State Taxes and Calm Next Steps
State rules can add to the tax on inherited retirement accounts. Many states tax these withdrawals as income, just like the IRS does. However, some states have no income tax at all. Florida, Texas, and Nevada are three examples.
Five states also have an inheritance tax. They are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa ended its inheritance tax for deaths on or after January 1, 2025. Pennsylvania is where tax on inherited retirement accounts most often includes inheritance tax. Under 72 P.S. § 9111(r), Pennsylvania generally taxes accounts the person could freely withdraw from before death. In practice, this often depends on whether the person was 59½ or older. Pennsylvania’s rates are 0% for a spouse and 4.5% for children and grandchildren. Siblings pay 12%, and most other heirs pay 15%.
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First, there is no need to rush. Before withdrawing anything, ask the account company to set up an inherited IRA in your name. Avoid cashing out in one lump sum without a plan. A large withdrawal can push you into a higher tax bracket. Next, find out whether the owner had started RMDs. Also check whether they took this year’s amount before they died. If they did not, the beneficiary generally needs to take it.
A little planning can lower the tax on inherited retirement accounts over time. For example, many families spread withdrawals across the full 10 years. Others take more in years when their income is lower. Also, if the estate paid federal estate tax, you may be able to claim a deduction under IRC § 691(c). This is called the “income in respect of a decedent” deduction. A licensed CPA or tax professional can help you weigh these choices.
Frequently Asked Questions
Do I have to pay taxes on an inherited IRA right away?
No. In most cases, you owe tax only when you take money out. However, you may need to take a yearly minimum, depending on the owner’s age. As a result, tax on inherited retirement accounts often comes in stages over several years.
Is an inherited 401(k) taxed the same way as an inherited IRA?
Typically, yes. Withdrawals from a traditional 401(k) are taxed as ordinary income. Many plans let you move the money into an inherited IRA through a direct transfer between companies. This can give you more flexibility on timing.
Does a surviving spouse pay tax on inherited retirement accounts?
A spouse still pays income tax on withdrawals from a traditional account. However, a spouse has the most choices. For example, a spouse can usually roll the account into their own IRA and wait until their own RMD age. Spouses also pay 0% inheritance tax in Pennsylvania and are exempt in the other inheritance-tax states.
Make Sure Your Plan Actually Works
A will or trust only does its job if the rest of your plan lines up. Two quick checks before you finish:
- Get your state’s exact rules — witnesses, notary, probate cost, and tax thresholds vary by state.
- Beneficiary forms beat your will — make sure your life-insurance beneficiaries are current, because named beneficiaries pass outside your will.
Sources & How to Verify
This guide is built from official sources. Always confirm the exact figure for your state:
- IRS — Estate & Gift Tax: irs.gov
- USA.gov — What to do when someone dies: usa.gov/death
- Uniform Law Commission (probate): uniformlaws.org
- Cornell Legal Information Institute: law.cornell.edu
- Your state’s probate court self-help portal and revenue department for the current statute and dollar figures.
Verified October 2026. Estate figures change — if you spot anything outdated, please contact us.
Related Guides
- Wills by State
- Trusts & Living Trusts by State
- Estate & Inheritance Tax by State
- Plain-English Estate Glossary
Disclaimer. This page is for general information only and is not legal or tax advice. Wills, probate, and estate-tax rules vary by state, county, and situation, and change over time. We are not a law firm, tax advisor, or financial planner, and we assume no liability for accuracy or completeness. For your specific situation — especially an active probate or a tax deadline — verify with your state’s court, statute, revenue department, or a licensed attorney in your state.