Inherited an IRA Since 2020? Many Beneficiaries Now Owe a Withdrawal Every Year
If you inherited a traditional IRA from a parent or another non-spouse relative who died in 2020 or later, and that person had already begun taking required minimum distributions, the 10-year rule you may have heard about is only half of your obligation. Under IRS final regulations that apply beginning with 2025, you must also take a minimum withdrawal every year, and the 2026 withdrawal is due by December 31, 2026.
The account still has to be emptied by the end of the tenth year after the year of death. What changed is the stretch in between. For many beneficiaries, years one through nine are no longer optional, and the IRS waivers that excused missed withdrawals from 2021 through 2024 have ended. This applies to federal tax rules nationwide, and California taxes these withdrawals as ordinary income for state residents.
Who Has to Take Annual Withdrawals From an Inherited IRA?
The answer turns on one date: whether the original owner died before or after their required beginning date. That date is April 1 of the year after the owner reached RMD age, which was 72 or 73 for most people who died in recent years, depending on birth year.
If the owner died on or after that date, they had already started RMDs. A non-spouse beneficiary who doesn't qualify for an exception must keep withdrawals going every year in years one through nine, then empty the account by the end of year ten. The IRS describes this as distributing the account at least as rapidly as the owner was.
If the owner died before that date, no annual withdrawals are required. The beneficiary can take money in any pattern, as long as the account is empty by the end of the tenth year.
A few beneficiaries sit outside the 10-year rule entirely. Surviving spouses, minor children of the owner, disabled or chronically ill individuals, and anyone not more than 10 years younger than the owner can generally take withdrawals over their own life expectancy instead.
How the Annual Amount Is Calculated
The required withdrawal is the prior December 31 balance divided by a life-expectancy factor from the IRS Single Life Table. The factor is based on the beneficiary's age in the year after death, then reduced by one each year after that.
A hypothetical example, rounded for illustration: a 55-year-old inherits an $800,000 IRA from a parent who died in 2024 at 80. Her first required withdrawal falls in 2025, and her factor at 56 is about 30.6, so the minimum is roughly $26,000. Each later year, the factor drops by one. Actual figures depend on the account balance, ages, and dates in a specific case.
Missing a required withdrawal triggers a federal excise tax of 25% of the amount that should have come out, reduced to 10% if the shortfall is corrected within the IRS correction window.
Where Inherited IRA Plans Go Wrong
Assuming the waivers continue. The IRS excused missed annual withdrawals for 2021 through 2024 while the rules were being finalized. Some beneficiaries read that relief as permission to wait until year ten. For anyone in the annual-withdrawal group, that relief ended with the 2024 tax year.
Taking only the minimum. Meeting the annual requirement and nothing more often leaves most of the balance for the last year or two. Withdrawing a large balance in a single year can push income into a much higher federal bracket and, for California residents, a much higher state bracket.
Treating an inherited Roth the same way. Roth IRA owners have no required beginning date, so beneficiaries of an inherited Roth generally have no annual requirement during the 10 years. The account must still be emptied by the end of year ten, and qualified withdrawals are typically tax-free.
What Else an Inherited IRA Touches
An inherited IRA rarely sits in isolation. The withdrawals land on the same tax return as the beneficiary's own wages, business income, or, later, their own RMDs and Social Security. For beneficiaries 63 or older, income in one year can raise Medicare premiums two years later through IRMAA surcharges.
California adds its own layer. Withdrawals are taxed as ordinary income for California residents, with no special rate. Federal law, however, generally prevents a state from taxing IRA distributions received by someone who no longer lives there. A beneficiary who plans to move out of California within the 10-year window may have reason to consider when withdrawals are taken relative to the move, a question worth reviewing with a tax professional before acting.
The inheritance also raises estate questions of its own. An inherited IRA needs its own named beneficiaries, and if the beneficiary dies before the account is emptied, the remaining balance follows a separate set of rules.
What a Thoughtful Beneficiary Would Do Next
Start with the date of death and the owner's birth date, and confirm with the custodian whether the account is in the annual-withdrawal group. If it is, make sure the 2026 amount is scheduled before December 31. Then look past this year: map the expected balance across the remaining years of the window and decide how much to take each year, rather than letting the minimum and the year-ten deadline make that decision.
That map works best alongside the rest of a household's tax picture, including its own income, future RMDs, Medicare premiums, and any plans to relocate. If you already work with an advisor or CPA, these are reasonable questions to bring to your next conversation.
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