Inherited IRA Tax Calculator 2026: What Your Heirs Actually Keep After the 10-Year Rule

If you leave a traditional IRA or 401(k) to your children, they do not inherit the money you see on the statement. They inherit a taxable account with a deadline. Every dollar that comes out is ordinary income to them, reported on their own return, and since 2020 almost every adult child has exactly ten calendar years to empty it. On a $500,000 IRA in the default scenario below, the Internal Revenue Service collects $277,597 and the family keeps $499,263. This calculator models that tax year by year, applies the 2026 federal brackets and your state rate, and then prices the life insurance that would hand your heirs the cash to pay the bill.

The rules changed three times in seven years and most published calculators still use the pre-2020 stretch formula. This tool uses the final regulations under IRC section 401(a)(9) that apply from the 2025 distribution year onward, the 2026 income tax brackets from Revenue Procedure 2025-32, the IRS Single Life Table and Uniform Lifetime Table from 26 CFR 1.401(a)(9)-9, and the Department of Labor and IRS definitions of the five eligible designated beneficiary categories.

What the 10-Year Rule Actually Costs in 2026

The SECURE Act of 2019 deleted the stretch IRA for most non-spouse beneficiaries. Before 2020 a 50-year-old daughter could inherit her father’s IRA and take distributions over her own life expectancy, spreading the tax across three or four decades and often keeping most of it in the 22 percent or 24 percent bracket. Since 2020 the account must be emptied by December 31 of the tenth calendar year after the year of death. Ten years of withdrawals instead of thirty-five means each distribution is two to three times larger, and larger distributions land in higher brackets.

The table below runs this calculator’s engine at the default profile – a $500,000 traditional IRA, a 45-year-old adult child beneficiary with $75,000 of other taxable income in a 5 percent state, 5 percent assumed growth – and lets the account ride to the deadline under the minimum-withdrawal strategy. Watch the last column: the tax is a percentage of the account, and that percentage climbs with the balance, because a bigger account produces bigger forced distributions and pushes more of them into the 32 percent and 37 percent brackets.

Inherited balance	Year 1 RMD	Total distributions	Income tax	Blended rate	Heirs keep
$100,000	$2,561	$155,372	$43,908	28.3%	$111,464
$250,000	$6,402	$388,430	$130,002	33.5%	$258,428
$500,000	$12,805	$776,860	$277,597	35.7%	$499,263
$1,000,000	$25,610	$1,553,720	$583,070	37.5%	$970,650
$2,000,000	$51,220	$3,107,440	$1,198,673	38.6%	$1,908,767

Three details in that table matter. First, the tax is not charged at the beneficiary’s ordinary rate – it is charged at the top of the stack. Every distribution is added on top of the income the beneficiary already earns, so the marginal rate on the first dollars out of the IRA is whatever bracket the beneficiary already occupies. Second, the account keeps growing while it is being drained, which is why total distributions exceed the balance on the statement. Third, the minimum-withdrawal strategy creates a spike in the final year: in the default case the year-10 distribution is $635,212 and the tax on that single year is $239,475.

Three Ways to Take the Money, Three Very Different Tax Bills

The 10-year rule sets a deadline, not a schedule. Whether the beneficiary withdraws nothing until year 10, withdraws roughly a tenth a year, or takes it out fast determines how much of the account survives. Switching from the minimum-withdrawal strategy to roughly equal annual withdrawals cuts the default tax bill by $97,242, a 35.0% reduction, purely by smoothing the income across the window.

Inherited balance	Tax, minimum only	Tax, equal yearly withdrawals	Dollars saved	Blended rate, equal withdrawals
$100,000	$43,908	$34,727	$9,181	27.0%
$250,000	$130,002	$87,171	$42,830	27.1%
$500,000	$277,597	$180,356	$97,242	28.0%
$1,000,000	$583,070	$370,055	$213,015	28.8%
$2,000,000	$1,198,673	$867,013	$331,660	33.7%

• Minimum only. Take the required minimum each year and the entire remaining balance in the final year. Maximises growth, maximises the year-10 spike, and on the default profile produces the highest tax of the three.
• Equal yearly withdrawals. Compute the level payment that empties the account exactly at the deadline. Produces the lowest tax in almost every scenario and is the strategy a tax professional will normally recommend.
• Front-load. Half the balance in year 1 and half in year 2. Best when the beneficiary has a low-income year, a large charitable deduction, or a business loss to absorb. Worst when the beneficiary already earns a lot, because two doubling years can push the marginal rate to the top bracket twice.

The Five Eligible Designated Beneficiary Categories

Five categories of beneficiary kept something close to the old stretch. They are defined in IRC section 401(a)(9)(E)(ii) and they are narrow. If your beneficiary is not on this list, the 10-year rule applies and the only lever left is timing.

Beneficiary	Ten-year rule?	Annual RMDs?	Window	Notes
Surviving spouse	No	From age 73 on the Uniform Lifetime Table	Lifetime	Can roll the IRA into their own, treat it as inherited, or take the 10-year payout. Usually the rollover is best.
Minor child of the owner	After age 21	Yes, on the Single Life Table	Until 21, then 10 years	Only the owner’s own minor child, not a grandchild. The 10-year clock starts at 21, so the account is empty by age 31 at the latest.
Disabled beneficiary	No	Yes, over life expectancy	Lifetime	Disability is defined by IRC section 72(m)(7) – unable to engage in substantial gainful activity. Documentation goes to the custodian.
Chronically ill beneficiary	No	Yes, over life expectancy	Lifetime	Defined by IRC section 7702B(c)(2) – unable to perform two or more activities of daily living for 90 days or more.
Not more than 10 years younger	No	Yes, over life expectancy	Lifetime	A sibling, partner or friend within ten years of the owner’s age. Eleven years younger fails the test.
Adult child, grandchild, friend	Yes	Yes if the owner died on or after the required beginning date	10 calendar years	The default case for most families. No stretch, no exceptions.
Estate, non-see-through trust	Five year rule in some cases	Depends on the required beginning date	5 years or the owner’s remaining life expectancy	A non-designated beneficiary. Death before the required beginning date produces the five year rule.
Charity	No	No	None	A tax-exempt beneficiary pays no income tax, so an IRA is an efficient charitable asset and a poor asset for heirs.

Does the 10-Year Rule Require Annual Withdrawals? The Required Beginning Date Split

This is the most expensive misunderstanding in inherited IRA planning, and the answer changed in 2024. The final regulations published as T.D. 10001 and effective for distribution calendar years beginning on or after January 1, 2025 settled a four-year argument by splitting beneficiaries into two groups based on whether the owner had reached the required beginning date.

1. Owner died before the required beginning date. No annual required minimum distribution is due in years 1 through 9. The beneficiary may withdraw any amount in any year, including nothing, provided the account is empty by December 31 of the tenth calendar year.
2. Owner died on or after the required beginning date. An annual required minimum distribution is due every year, years 1 through 9, calculated on the beneficiary’s Single Life Table divisor and then reduced by one each subsequent year. On top of that, the whole remaining balance must come out by December 31 of year 10.
3. Roth accounts always fall in the first group. A Roth owner never has a required beginning date, so the beneficiary has no annual withdrawal obligation – only the ten-year deadline, and no tax on the withdrawals.

The required beginning date is April 1 of the year after the owner reaches the applicable age – age 73 for owners born from 1951 through 1959, and age 75 for owners born in 1960 or later under SECURE 2.0 section 107. The annual withdrawal requirement applies from the 2025 distribution year. The IRS waived the penalty for missed distributions in 2021, 2022, 2023 and 2024 while the rule was in dispute, but no further relief has been announced.

Miss a required distribution and the excise tax under IRC section 4974 is 25 percent of the shortfall – reduced from 50 percent by SECURE 2.0 – and it drops to 10 percent if the missed amount is corrected within the correction window. The tax is filed on Form 5329. It is a penalty on the missed amount, not on the whole account, but on a $500,000 account the first year’s required distribution of $12,805 carries a $3,201 excise tax if it is never corrected.

Where Life Insurance Fits: Paying a Tax Bill Your Heirs Cannot See Yet

Life insurance does not eliminate the income tax on an inherited IRA. Nothing does, short of naming a charity or converting the account during your lifetime. What insurance does is deliver cash to the same people on the same day: a death benefit is income tax free under IRC section 101(a), it is not income in respect of a decedent under IRC section 1014(c), it is paid outside probate when a person is named as beneficiary, and it has no distribution clock attached to it.

That matters because the tax is due in the years the money comes out, and the beneficiary may be in their peak earning years. A 45-year-old financial analyst inheriting a $500,000 IRA and taking level withdrawals adds about $67,990 a year of taxable income – roughly doubling their taxable income and pushing a large slice of it into the 32 percent bracket. A term policy sized to the projected tax bill moves the cash to the beneficiary at the moment of death, before the decade of withdrawals begins, so the tax can be paid from tax-free proceeds instead of from the IRA itself.

Policy owner	Coverage to replace the tax	20-yr Standard	20-yr Preferred	20-yr Smoker	10-yr Standard
35 Male	$300,000	$16.64	$14.14	$46.59	$12.98
45 Male	$300,000	$27.47	$23.35	$76.91	$21.42
55 Male	$300,000	$62.61	$53.22	$175.30	$48.83
65 Male	$300,000	$175.73	$149.37	$492.05	$137.07
45 Female	$300,000	$21.42	$18.21	$59.99	$16.71
55 Female	$300,000	$48.83	$41.51	$136.74	$38.09

Premiums in that table are monthly costs for $300,000 of level term – the coverage this calculator recommends to cover the default tax bill of $277,597 – priced on the market rate convention used across this site, at the owner age shown. The row that should catch your eye is age 45: the same $300,000 of coverage that costs $27.47 a month at 45 costs $175.73 a month at 65, and $76.91 a month for a smoker. Waiting is the single most expensive decision in this entire plan.

What Life Insurance Does That an IRA Cannot

Feature	Inherited traditional IRA	Life insurance death benefit
Income tax to the beneficiary	Ordinary income on every dollar withdrawn	None – IRC section 101(a)
Step-up in basis	None – income in respect of a decedent	Not applicable – the benefit is already tax free
Distribution deadline	10 calendar years for most non-spouse beneficiaries	None – paid as a lump sum or held by the carrier
Annual required withdrawals	Required in years 1-9 when the owner died on or after the required beginning date	None
Probate	Follows the beneficiary designation, but a trust or estate beneficiary can pull it into the estate administration	Paid directly to a named beneficiary, outside probate
Creditor exposure	Inherited IRAs are not protected in bankruptcy in most circuits, unlike the owner’s own IRA	State exemption and beneficiary trust structures apply
Growth inside the wrapper	Tax deferred until withdrawal	Cash value grows tax deferred in permanent policies; a term policy has no cash value
Estate tax	Included in the gross estate, but an estate tax deduction is allowed for the income tax later paid on the same dollars under IRC section 691(c)	Included in the gross estate if the insured holds incidents of ownership under IRC section 2042; excluded when an ILIT owns the policy

For a larger estate, the two problems compound. The IRA is both an estate tax asset and an income tax asset, and the two taxes stack on the same dollars. Our estate tax and ILIT calculator sizes the federal and state estate tax, and the estate liquidity calculator shows what the estate would have to sell to raise the cash. Section 691(c) softens the stacking by allowing an income tax deduction for the estate tax paid on the IRA, but it does not eliminate it.

How This Calculator Works

The engine is deliberately transparent, and every figure on this page is produced by the same functions the tool above runs.

• Window. Ten calendar years for a non-eligible designated beneficiary. Five years for an estate or non-see-through trust when the owner died before the required beginning date. The owner’s remaining Single Life Table expectancy for a non-designated beneficiary when the owner died on or after it. The beneficiary’s own life expectancy for an eligible designated beneficiary.
• Required distribution. Account balance divided by the Division Table divisor: the Single Life Table for beneficiaries, the Uniform Lifetime Table for a spousal rollover, reduced by one each year for the ten-year rule.
• Tax. Each distribution is added to the beneficiary’s other taxable income and taxed through the 2026 federal brackets from Revenue Procedure 2025-32 – 10, 12, 22, 24, 32, 35 and 37 percent – plus the state rate. The difference between the tax on total income and the tax on other income is the tax caused by the withdrawal.
• Assumed growth. The account compounds at the rate you choose before each year’s withdrawal, then the withdrawal is subtracted. Set growth to zero to see the tax on a static account.
• Life insurance offset. Recommended coverage is the projected tax rounded up to the next $25,000. The premium is level term on the site’s standard rate convention and does not include any carrier’s underwriting decision.

The Default Scenario, Year by Year

A $500,000 traditional IRA, owner dies at 60 after the required beginning date, adult child beneficiary aged 45 with $75,000 of other taxable income, single filer, 5 percent state rate, 5 percent growth, minimum withdrawals. The mandatory years are small; the deadline year is not.

Year	Balance at start	Distribution	Income tax	Net to heirs	Balance after
Year 1	$500,000	$12,805	$3,457	$9,348	$512,195
Year 2	$512,195	$13,445	$3,630	$9,815	$524,360
Year 3	$524,360	$14,117	$3,812	$10,306	$536,460
Year 4	$536,460	$14,823	$4,002	$10,821	$548,460
Year 5	$548,460	$15,564	$4,202	$11,362	$560,319
Year 6	$560,319	$16,343	$4,413	$11,930	$571,992
Year 7	$571,992	$17,160	$4,633	$12,527	$583,432
Year 8	$583,432	$18,018	$4,865	$13,153	$594,586
Year 9	$594,586	$18,919	$5,108	$13,811	$605,396
Year 10	$605,396	$635,666	$239,475	$396,191	$0

Nine years of minimum withdrawals cost about $38,122 in tax combined. The tenth year, when the remaining $635,666 has to come out at once, costs $239,475 by itself – 86.3% of the total bill lands in a single tax year. Run the same account on the equal-withdrawals strategy and the tax falls to $180,356, which is $97,242 more money left in the family’s hands for no extra risk.

Steps to Protect Your Heirs From the Inherited IRA Tax

1. Confirm the beneficiary designations on every retirement account and ask whether each beneficiary is an eligible designated beneficiary – the answer changes the whole plan.
2. Estimate the tax with the calculator above at your actual balance and your beneficiary’s actual bracket, not at a headline rate.
3. Give the beneficiary a written withdrawal plan that spreads the income across the ten years instead of spiking in the final one.
4. Consider a partial Roth conversion during your lifetime while your own bracket is lower than your beneficiary’s will be.
5. Size a term policy to the projected tax bill and name the beneficiary who will owe the tax. A $300,000 policy at $119.17 a month hands them the cash tax free.
6. Review the plan annually – brackets, balances and beneficiary incomes all move.

Watch: How the Inherited IRA Rules Work in 2026

A short walkthrough of the 10-year rule and who is exempt from it. The deadline is the same for almost every adult child beneficiary; what changes from family to family is the bracket the money comes out in.

Frequently Asked Questions

What is the 10-year rule for an inherited IRA?

For owners who die after December 31, 2019, most non-spouse beneficiaries who are not eligible designated beneficiaries must empty the inherited account by December 31 of the tenth calendar year after the year of death. The old lifetime stretch is gone for adult children, grandchildren and unmarried partners.

Do I have to take a withdrawal every year during the 10-year window?

Only if the owner died on or after their required beginning date. In that case the final regulations require an annual required minimum distribution in years one through nine as well as full depletion by year ten. If the owner died before the required beginning date, no annual withdrawal is required and the only obligation is the deadline.

How is the tax on an inherited IRA calculated?

Every distribution from a traditional inherited IRA is ordinary income on the beneficiary’s Form 1040, layered on top of the income they already earn. This calculator applies the 2026 federal brackets to the stacked income and adds the state rate. There is no 10 percent early distribution penalty on an inherited IRA, regardless of the beneficiary’s age.

Who counts as an eligible designated beneficiary?

Five categories: the surviving spouse, a minor child of the owner until age 21, a beneficiary who is disabled, a beneficiary who is chronically ill, and an individual not more than ten years younger than the owner. Everyone else falls under the ten-year rule.

What happens if a required distribution is missed?

The excise tax under IRC section 4974 is 25 percent of the shortfall, and 10 percent if it is corrected within the correction window. The IRS waived the penalty for 2021 through 2024 while the regulations were in dispute, but that relief has ended and 2025 was the first year of full enforcement.

Does life insurance pay the income tax on the inherited IRA?

The tax is still owed by the beneficiary. Life insurance supplies tax-free cash under IRC section 101(a) to pay it, which keeps the IRA intact for the beneficiary instead of forcing them to sell the very asset that created the tax. When an ILIT owns the policy, the death benefit also stays outside the taxable estate.

Can a trust avoid the ten-year rule?

Only a see-through trust that satisfies the four-part test in Publication 590-B qualifies as a designated beneficiary, and it can only preserve an eligible designated beneficiary’s stretch – it cannot create one. A non-see-through trust is a non-designated beneficiary and faces the five year rule or the owner’s remaining life expectancy.

Related Resources

• Life insurance versus a 401(k): when each one is the right wrapper
• Life insurance versus a Roth IRA for tax-free income
• Estate tax and ILIT calculator: sizing the estate tax bill
• Estate liquidity calculator: what the estate has to sell to raise cash
• Gift now or inherit later: the transfer timing calculator
• Human life value calculator: sizing coverage from your income
• IRS Publication 590-B – Distributions from Individual Retirement Arrangements
• IRS – Required minimum distributions (RMDs) for retirement plans
• NAIC consumer resources – insurance regulation and policyholder rights
• AM Best – insurer financial strength ratings

Next step: run your own balance and your own beneficiary’s bracket through the calculator above, then compare the tax it reports with the cost of a term policy sized to cover it. The difference over ten years is usually the largest single number in the plan.