Inherited IRA Tax Rules in 2026: Navigating the 10-Year Rule

When Mark's mother died in 2022, she left him her traditional IRA — about $340,000. Mark was 48, working, and in the 24% tax bracket. His mother had been taking RMDs for several years before her death.

His first instinct was to let the money grow. "I'll just take it all out in year 10," he told me when we met.

That plan would have cost him dearly — both in taxes and in a potential IRS penalty. The rules that govern inherited IRAs are more complicated than most people realize, and the IRS has spent the past few years clarifying them in ways that have surprised many heirs and their advisors.

Here is what you need to know in 2026.

Who Is Affected: The SECURE Act Timeline

The rules depend heavily on when the original account owner died.

If you inherited an IRA from someone who died in 2020 or later, the 10-year rule almost certainly applies to you (unless you qualify as an Eligible Designated Beneficiary — more on that below).

The 10-Year Rule: What It Actually Requires

The 10-year rule requires that the entire inherited IRA be distributed by December 31 of the 10th year following the year of death.

Example: Mother dies October 2022. Beneficiary must distribute the full account by December 31, 2032.

Simple enough. But the IRS added a critical clarification in 2024 that changed how many beneficiaries must plan:

If the original owner had already started taking RMDs (i.e., had reached their Required Beginning Date), the beneficiary must also take annual distributions in years 1 through 9 of the 10-year period.

This annual distribution is calculated based on the beneficiary's own life expectancy in year 1, then reduced by 1 each subsequent year.

This surprised many people. The original SECURE Act was ambiguous on this point. Many beneficiaries and advisors assumed the 10-year rule meant "no distributions required until year 10." The IRS clarified otherwise. The IRS issued penalty waivers for 2021–2024, giving people time to adjust — but those waivers are over.

The Annual Distribution Requirement in Practice

Here's how to calculate your required distribution from an inherited IRA (if the original owner was taking RMDs):

1. Find your age on December 31 of the year following the year of death
2. Look up your life expectancy factor from IRS Publication 590-B Single Life Table
3. Divide the prior year-end account balance by that factor for year 1
4. Reduce the factor by 1 each subsequent year

Example (simplified):

• Inherited $340,000 IRA; mother died in 2022
• Mark is 49 on December 31, 2023
• Life expectancy factor at age 49: 35.1
• 2023 required distribution: $340,000 ÷ 35.1 = $9,686
• 2024: Account balance ÷ 34.1, and so on

Mark still must distribute the full balance by 2032 — but the annual minimums prevent him from leaving everything until the last year.

Who Is Exempt: Eligible Designated Beneficiaries

Some beneficiaries are still entitled to use the old "stretch IRA" rules — distributing over their own life expectancy rather than following the 10-year rule.

Eligible Designated Beneficiaries (EDBs):

If you qualify as an EDB, you can spread distributions over your life expectancy — potentially over 30+ years. This is the old "stretch IRA" — and it's a significantly better tax outcome than the 10-year rule for most people.

The Tax Bracket Problem for Heirs

Here's the real issue for working-age heirs like Mark: taking large distributions from a traditional inherited IRA generates ordinary income on top of your salary.

If Mark earns $95,000/year and takes $50,000 per year from the inherited IRA, his taxable income jumps to $145,000 — pushing a significant portion into the 22% bracket and some into the 24% bracket.

Distribution timing strategies:

Front-load in low-income years. If you're between jobs, taking parental leave, or in a year with large deductions, take more from the inherited IRA while your effective rate is lower.

Coordinate with other income. If you have significant capital gains or other income planned, delay the inherited IRA distribution that year.

Consider Roth conversions in parallel. If you have your own traditional IRA, a year when you're taking smaller inherited IRA distributions might be a good year to do a Roth conversion on your own accounts.

Don't ignore the 10-year clock. The worst outcome is letting the account sit and then facing a massive forced distribution in year 10 — potentially $400,000+ pushed into your income in a single year.

Inherited Roth IRAs Under the 10-Year Rule

If you inherited a Roth IRA (not traditional), the 10-year rule still applies — but the tax impact is different.

Qualified distributions from an inherited Roth IRA are still tax-free. The 10-year rule means you must distribute the entire account by year 10, but distributions generally don't generate taxable income. The cost of "waiting until year 10" is just lost tax-free growth inside the account, not a tax bill.

The annual distribution requirement for inherited Roths: if the original owner had passed their Required Beginning Date, annual distributions may be required. However, since the original owner's RBD for a Roth IRA generally doesn't apply during their lifetime (Roth IRAs had no RMDs during the owner's life under current law), this wrinkle is less common for inherited Roths.

What to Do Now

If you inherited a traditional IRA from someone who died in 2020 or later:

1. Identify whether annual RMDs are required — did the original owner have a Required Beginning Date? (They turned 72 or 73 before death, depending on birth year)
2. Calculate your 2026 required distribution using IRS Publication 590-B
3. Plan your total income for 2026 — understand how the distribution affects your tax bracket
4. Model years 2027–2032 — determine the smartest distribution pace given your income trajectory
5. Consider whether a Roth conversion makes sense in parallel with these distributions

The inherited IRA rules are genuinely complex, and the wrong plan can cost tens of thousands in unnecessary taxes. Work with an estate planning and tax advisor who understands the 10-year rule and can model the distribution strategy that minimizes your total tax burden.