How are inherited IRA withdrawals taxed?
For an inherited traditional IRA, withdrawals are generally included in your ordinary income for the year you receive them — not taxed as capital gain, and not sheltered by a basis adjustment at death. Retirement balances are treated as income in respect of a decedent, so what would have been taxable to the owner remains taxable to the beneficiary.
For an inherited Roth IRA, distributions are generally tax-free where they are qualified, which depends on a five-year period measured from the decedent's first Roth contribution rather than from your inheritance. Being tax-free does not remove the requirement to distribute the account.
The additional 10% tax on early distributions generally does not apply to amounts paid to a beneficiary after the owner's death, whatever the beneficiary's age. That exception addresses the additional tax only — ordinary income tax on the taxable portion still applies.
The steps that cannot be undone
Most of this can be worked through slowly. A small number of actions cannot: a nonspouse beneficiary taking a distribution instead of arranging a direct transfer, an inherited balance commingled with the beneficiary's own IRA, or a spousal treatment made before its consequences were understood.
Tax character passes through to the beneficiary
Retirement balances do not receive the basis adjustment that applies to much other inherited property. What would have been income to the owner remains income to the beneficiary, and the account's traditional or Roth character carries through.
What a general answer cannot tell you
A general explanation can name the variables and show how they interact. It cannot establish your beneficiary classification, confirm which regime applies to your account, calculate an amount, or tell you when to withdraw.
Those determinations rest on the account documents, the beneficiary designation in force at death and your own tax picture, and they belong with the custodian, a tax professional and, where a trust or an estate is involved, an attorney. Nothing here is individualized tax, legal, investment or estate advice.
Reviewed by Bay Area Wealth Advisors. Last reviewed 2026-09-18. Educational information only — not individualized financial, tax or legal advice.