It depends on whether you withdraw any of the funds in 2025, and your relationship to the person from whom you are inheriting the account. There is no tax consequence of inheriting the account until you withdraw from it.
Withdrawals of contributions from an inherited Roth are tax free. Most withdrawals of earnings from an inherited Roth IRA account are also tax-free. However, withdrawals of earnings may be subject to income tax if the Roth account is less than 5-years old at the time of the withdrawal.
Generally, inherited Roth IRA accounts are subject to the same Required Minimum Distribution (RMD) requirements as inherited traditional IRA accounts.
The factors that affect the distribution requirements for inherited retirement plan accounts and IRAs include:
- Whether the account owner died after 2019 (the SECURE Act made changes to the RMDs for beneficiaries if the death of the account holder occurred after 2019).
- The relationship of the beneficiary to the account owner and certain characteristics (spouse, minor child, disabled or chronically ill individual, entity other than an individual)
- Whether the original account owner died before or after their required beginning date (the first date the original account owner was required to begin taking RMDs).
See this IRS article and this TurboTax Blog for more information.
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