How much tax will I pay on an inherited IRA?

The amount of tax you pay depends on how much you withdraw during the year and your ordinary income tax bracket. If you withdraw $10,000 and you're in the 22% tax bracket, for example, you'd owe $2,200 in taxes on your inherited IRA withdrawal. If the estate of the person you inherited the IRA from had to pay taxes on the IRA funds, you may get a deduction for any estate taxes paid, which can reduce the amount you owe.

How do I avoid paying taxes on my inherited IRA?

Unless it's a Roth IRA, you will owe taxes on your inherited IRA withdrawals. However, you may be able to reduce the amount you owe by spreading your withdrawals over 10 years or making larger withdrawals in low-income years, thereby paying a smaller percentage in taxes compared to making a lump-sum withdrawal.

What's the best thing to do with an inherited IRA?

Inherited IRA funds are yours to spend as you wish. You may choose to use that money for expenses today or invest it for your future. However, you cannot leave the money in the inherited IRA indefinitely. Generally, you must withdraw the money within 10 years of inheriting the account to avoid tax penalties.

What is the new IRS rule for inherited IRAs?

The SECURE Act, passed in 2020, eliminated the stretch IRA option for most beneficiaries. This enabled you to take required minimum distributions (RMDs) from the inherited IRA based on your life expectancy, resulting in smaller required withdrawals each year. Now, unless you're the original account owner's spouse or minor child, you're disabled or chronically ill, or you're less than 10 years younger than the original owner, you must withdraw all funds within 10 years of inheriting the IRA.

Inherited IRA Rules: Everything You Need to Know

If you inherit an IRA, you need to know the tax rules.

By Lyle Daly – Updated Feb 28, 2026 at 4:34 PM EST | Fact-checked by Parker Hicks

Key Points

Inherited IRAs must be withdrawn within 10 years; taxes are due upon withdrawal.
Spouses inheriting IRAs have flexible options, including rollovers and stretching distributions.
Non-spouse beneficiaries must follow stricter withdrawal timelines due to the SECURE Act.

Taxes on an inherited IRA are due when money is withdrawn from the account and taxed at ordinary income tax rates. Taxes are typically due only on a traditional IRA, not on a Roth IRA (as long as the Roth IRA was open for at least five years).

However, you can't leave money invested in a traditional IRA indefinitely and avoid owing taxes. There are rules governing when you must make withdrawals and pay the corresponding taxes, with the exact requirements depending on whether you inherit the IRA from a spouse or a non-spouse.

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About the Author

Lyle Daly is a contributing Motley Fool stock market analyst covering information technology and cryptocurrency. Lyle has been a contributor at the financial services company since 2018. His work has been featured on USA Today, Yahoo Finance, MSN, Fox Business, and Nasdaq. Before joining The Motley Fool, he wrote for financial brands including Intuit.

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Inherited IRA Rules: Everything You Need to Know

If you inherit an IRA, you need to know the tax rules.