Is an inherited IRA or retirement plan taxable?

Usually, only the distributions from an inherited traditional IRA are taxable, just as for non-inherited traditional IRAs. Distributions from an inherited Roth IRA are taxable only if it was established in the last five years.

Inherited 401(k) plans are or will be taxable. It depends on the plan's rules. Many 401(k) plans require a lump-sum distribution when the account holder dies. If the beneficiary is the surviving spouse, they can roll the 401(k) into an IRA. If the spouse isn't the beneficiary, they may have to take a lump-sum payment and pay taxes.

Inherited IRA rules can be complicated, but we're here to make it easier. By telling TurboTax  your IRA or plan was inherited, we'll ask a few questions to see if anything is taxable this year.