The IRS generally gives you 10 years to empty an inherited IRA, but that flexibility can work against you. Waiting until the deadline to withdraw may mean taking the entire balance in a shorter window, and larger withdrawals could push you into a higher tax bracket. Taking smaller amounts over the full decade could help you keep more of your inheritance out of the IRS’s hands.
One Tax Mistake You Could Face With the 10-Year Rule
If you inherit a traditional IRA from someone other than your spouse, you generally must empty the account by December 31 of the 10th year after the original owner’s death. The SECURE Act replaced the lifetime “stretch IRA” for most non-spouse beneficiaries with this 10-year deadline.
The IRS generally doesn’t tell you how much to withdraw each year. It only requires that the account be empty by the deadline. If the original owner had already started taking required minimum distributions (RMDs), you would likely need to continue taking annual RMDs during the 10-year period while still emptying the account by the last year.
That flexibility is where beneficiaries could make a costly mistake. The 10-year rule sets a deadline, but it leaves you to decide when and how much to withdraw after taking any RMDs. Those decisions affect how much of your inheritance you could keep after taxes.
The Math Behind the Potential Tax Hit
To show how withdrawals can affect your taxes, let’s assume that you inherit a $400,000 traditional IRA and earn $90,000 annually as a single filer. Using the 2026 federal income tax brackets, the table below breaks down your total federal tax if you withdraw the full $400,000 in the 10th year, which would bring your taxable income to $490,000.
| Bracket | Income Taxed at This Rate | Tax Owed |
|---|---|---|
| 10% | $12,400 | $1,240 ($12,400 × 10%) |
| 12% | $38,000 ($50,400 − $12,400) | $4,560 ($38,000 × 12%) |
| 22% | $55,300 ($105,700 − $50,400) | $12,166 ($55,300 × 22%) |
| 24% | $96,075 ($201,775 − $105,700) | $23,058 ($96,075 × 24%) |
| 32% | $54,450 ($256,225 − $201,775) | $17,424 ($54,450 × 32%) |
| 35% | $233,775 ($490,000 − $256,225) | $81,821 ($233,775 × 35%) |
| Total | $490,000 | $140,269 |
Your $90,000 salary alone would owe $14,512 in tax, and that’s already part of the $140,269 total above. So the IRA withdrawal itself adds up to $125,757 of that bill.
For a comparison, let’s assume that you divide your inheritance into $40,000 withdrawals each year. This would make your taxable income in the first year $130,000. Your salary and IRA withdrawal would fill the bottom four brackets.
| Bracket | Income Taxed at This Rate | Tax Owed Per Year |
|---|---|---|
| 10% | $12,400 | $1,240 ($12,400 × 10%) |
| 12% | $38,000 ($50,400 − $12,400) | $4,560 ($38,000 × 12%) |
| 22% | $55,300 ($105,700 − $50,400) | $12,166 ($55,300 × 22%) |
| 24% | $24,300 ($130,000 − $105,700) | $5,832 ($24,300 × 24%) |
| Total Per Year | $130,000 | $23,798 |
In this example, your $90,000 salary alone would still owe $14,512, so the $40,000 withdrawal accounts for $9,286 of that bill. Multiplied across the full 10-year period, you would owe $92,860 in total federal tax on the inheritance, saving roughly $32,900 when compared with a full lump sum withdrawal in year 10.
| Withdrawal Strategy | Federal Tax Attributable to the IRA Withdrawal |
|---|---|
| Full $400,000 in year 10 | $125,757 |
| $40,000 per year for 10 years | $92,860 |
| Difference | $32,897 |
Keep in mind that if your salary or other income changes in a given year, the tax owed on each withdrawal would change too. A financial advisor could help you model how a lump-sum compares with a spread-out withdrawal strategy for your specific situation.
Why Having a Plan in Year One Matters
Beneficiaries often postpone planning because the deadline is years away. Starting with a withdrawal plan in the first year can give you more time to adjust distributions as your income changes instead of making last-minute decisions when the deadline approaches.
Putting a withdrawal plan in place during the first year gives you a framework to revisit over time instead of making decisions under pressure as the deadline approaches. A financial advisor can help you build a long-term withdrawal schedule and adjust it as your financial situation changes.
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