I Inherited a Roth IRA From My Parent — Do I Owe Taxes on It?

Your parent left you a Roth IRA, and somewhere in the paperwork you saw the words “distribution” and “taxable” and your stomach dropped. Here’s the relief up front: in almost every case, an inherited Roth IRA comes to you income-tax-free. Your parent already paid the tax on this money when they put it in, and that’s the whole point of a Roth. There is exactly one situation where you can still owe tax — and it’s narrow, it only ever touches the growth, and you can usually sidestep it entirely just by knowing the date your parent opened the account.

The one real deadline is on the back end: you have to empty the account within ten years. But unlike an inherited traditional IRA, you don’t have to take a penny out along the way. If you want someone to confirm your specific numbers and the cleanest way to time the withdrawals, that’s what our inherited IRA tax planning is for. Here’s how it works.

Do I owe taxes on an inherited Roth IRA?

Almost always, no — the money comes out income-tax-free, with no 10% early-withdrawal penalty either, no matter your age. The single exception is the earnings portion, and only if the account hadn’t been open long enough when your parent died.

Two separate rules are doing the work here, and people blur them together. One is whether the distribution is taxable (the 5-year rule, below). The other is the 10% early-distribution penalty — and that one is never your problem, because money paid to a beneficiary after the owner’s death is exempt from it under IRC § 72(t)(2)(A)(ii), regardless of how old you are. So a 40-year-old inheriting a Roth from a parent is never hit with the penalty that would apply to their own IRA. The only question left is the income tax on any growth.

When is an inherited Roth IRA distribution tax-free?

When it’s a “qualified” distribution — and for an inherited Roth, that comes down to a single test: had the account been open for at least five years?

A Roth distribution is fully tax-free when two boxes are checked: a triggering event has happened, and the five-year holding period is met. Your parent’s death satisfies the first box automatically. So the entire question of whether you owe anything collapses into the second one — the five-year clock under IRC § 408A(d)(2)(B). Clear five years and every dollar, contributions and growth alike, comes out tax-free.

What’s the 5-year rule, and how do I know if it’s met?

The five-year clock starts on January 1 of the year your parent first contributed to any Roth IRA — not the year you inherited it, and not necessarily the year they opened the specific account you received.

This is the fact that decides your tax bill, so it’s the first thing to pin down. It’s the original owner’s clock, and it carries over to you; you don’t start a fresh one. If your parent opened their first Roth back in, say, 2014 and died in 2026, the account is well past five years and you’re completely in the clear — take it all out whenever you like, tax-free. The clock only matters when it’s a newer Roth.

What if my parent’s Roth was less than 5 years old?

Then only the earnings are taxable — never the money your parent contributed or converted — and even then only if you actually withdraw into that growth before the five years are up.

Two things protect you here. First, the ordering rules under IRC § 408A(d)(4)(B): every withdrawal is treated as coming out of your parent’s original contributions first, then any conversions, and only last out of earnings. So if your parent put in $80,000 and it grew to $95,000, the first $80,000 you take is tax-free no matter what the five-year clock says — only withdrawals that dip into the $15,000 of growth can be taxed. Second, the clock keeps running after death. If the Roth was three years old when your parent died, you can simply wait until it crosses the five-year mark and then the earnings are tax-free too. The trap only springs on someone who withdraws the growth from a newly-opened Roth early. Use the quick check below to see where you land.

Do I have to take money out every year?

No. An inherited Roth IRA has no annual required minimum distributions during the ten years — none in years one through nine — regardless of how old your parent was when they died.

This is the big difference between an inherited Roth and an inherited traditional IRA, where whether you owe annual withdrawals turns on your parent’s age. With a Roth it never does, because a Roth owner is never subject to lifetime required distributions in the first place (IRC § 408A(c)(4)) — so for distribution purposes your parent is always treated as having died before any required start date. The practical result: you can leave the entire balance untouched, growing tax-free, for the full ten years if you want.

When do I have to empty the account?

By December 31 of the tenth year after the year your parent died. That’s the one hard deadline, and it comes from the SECURE Act’s 10-year rule under IRC § 401(a)(9)(H).

So if your parent died in 2026, the account has to be fully distributed by the end of 2036. Miss it, and the amount you should have taken can draw an excise tax — the same missed-distribution penalty that runs through Form 5329. Set a reminder for year ten now; it’s a decade away and exactly the kind of thing that gets forgotten.

Should I leave it alone to grow, or take it out now?

For most people, let it grow. An inherited Roth is the one inherited account where waiting is usually the smart move — the growth is tax-free, so every year you leave it in is another year of tax-free compounding you get to keep.

This is the opposite of the playbook for an inherited traditional IRA, where you spread withdrawals across the decade to avoid a giant taxable year ten. With a Roth there’s no tax cost to a big year-ten withdrawal, so the usual move is to let the whole balance ride and pull it out near the deadline. Two sensible caveats: it’s still invested, so if you’ll need the cash soon or can’t stomach the market risk, taking it sooner is fine and costs you nothing in tax; and if the account is a young Roth still inside its five-year window, time your withdrawals of the growth for after the clock clears. The contrast with a traditional inheritance is the whole reason it helps to understand how Roth and traditional accounts differ before you decide.

Will I get a 1099-R, and does that mean I owe tax?

Yes, you’ll get a Form 1099-R for any year you take a distribution — but receiving one does not mean the money is taxable.

An inherited Roth distribution is normally coded as a death distribution (Box 7 Code 4 or, where it’s clearly qualified, a Roth-specific code), which signals it’s exempt from the 10% penalty. The form reports the gross amount; it doesn’t decide what’s taxable. If the distribution is qualified (5-year clock met), none of it is taxed. If it’s a non-qualified withdrawal that reaches into earnings, you use Form 8606, Part III to apply the ordering rules and figure the small taxable piece. In the common case — an older Roth taken tax-free — the 1099-R is just paperwork.

What if I inherited it from someone who had already inherited it?

Then you’re a successor beneficiary, and you don’t get a fresh ten years — you finish out whatever was left of the original beneficiary’s 10-year clock.

If your parent had inherited this Roth from someone else and then died partway through their own 10-year window, you step in for the remainder, not for a new decade. The tax treatment stays the same — still income-tax-free if the original owner’s 5-year clock is met — but the deadline is the inherited one. It’s worth confirming whose death started the clock before you assume you have a full ten years.

What if I inherited the Roth from my spouse, not a parent?

Then you have an option an adult child doesn’t: you can make the Roth your own, which erases required distributions entirely.

A surviving spouse can roll an inherited Roth into their own Roth IRA and be treated as the owner — and a Roth owner has no lifetime required distributions at all, so there’s no 10-year clock and nothing you’re forced to take out, ever. That’s usually the better path for a spouse, though the timing and the penalty rules differ from the parent case; we walk through the spousal decision in should you roll an inherited IRA from a spouse into your own.

What should I do first?

Find out the year your parent first opened a Roth IRA — that one date tells you whether the five-year clock is met and therefore whether anything is taxable. Then make sure the account is retitled correctly as an inherited Roth (your parent’s name, deceased, for the benefit of you), not cashed out or moved into your own name, which would forfeit the tax-free growth.

From there it’s mostly patience: in the typical case you have a tax-free account you can let grow for up to ten years, with one deadline to remember. If you’d like someone to confirm the 5-year status, handle a young-Roth timing question, or build the withdrawal schedule around your own income, that’s the heart of our inherited IRA tax planning. Book a remote consult with our office; with a Roth the stakes are usually about not wasting a tax-free runway, and that’s worth a few minutes to get right.

Disclaimer: This article is for educational purposes only and does not constitute investment, tax, or financial advice. Tax law is highly fact-specific and subject to change. Always consult a qualified professional about your specific situation.