You can convert an inherited IRA to a Roth, but the rules depend on who left it to you

An inherited IRA can be converted to a Roth IRA, but the process and tax consequences differ sharply depending on your relationship to the person who died. If you are the surviving spouse, you have the most flexibility — you can treat the inherited IRA as your own or convert it to your own Roth. If you are a non-spouse beneficiary (adult child, sibling, friend, or other heir), you can convert the inherited IRA to an inherited Roth IRA, but you cannot treat it as your own, and the conversion triggers income tax on the full amount you move.

The conversion itself is straightforward: you instruct the financial institution holding the inherited IRA to move the money directly to a Roth account in your name (or in your name as beneficiary, if you are not the spouse). The tax bill arrives when you file that year's return. The larger question is whether converting makes sense for your situation — that depends on your current income, how long you plan to hold the account, and whether you can pay the tax from outside the account.

Key Takeaways

  • Surviving spouses can convert an inherited IRA to their own Roth IRA and treat it as if they always owned it, with no special restrictions.
  • Non-spouse beneficiaries can convert to an inherited Roth IRA but must pay income tax on the full amount converted in the year of conversion.
  • The conversion itself is a direct trustee-to-trustee transfer; you do not touch the money and do not trigger early withdrawal penalties.
  • You must complete the conversion by December 31 of the year you want it to count, though the IRS can grant extensions in some cases.
  • Paying the tax from outside the inherited account preserves more money for tax-free growth, but many people cannot afford to do so.

How the conversion works for surviving spouses

If you inherited an IRA from your spouse, you have three options: keep it as an inherited IRA in your spouse's name, convert it to your own IRA (treating it as if you always owned it), or convert it to your own Roth IRA. The Roth conversion is the most flexible path because you can do it at any time, and there is no age limit — you can convert even after you turn 73 and are taking required minimum distributions.

The conversion itself is a direct transfer from the inherited IRA to a new Roth IRA you open in your own name. You pay income tax on the full amount converted, calculated at your ordinary income tax rate for that year. Once the money is in the Roth, it grows tax-free, and you can withdraw it tax-free after age 59½ (as long as the Roth has been open for at least five years). If you convert before age 59½, you can withdraw the amount you converted without penalty, but earnings on that conversion are subject to the early withdrawal penalty unless an exception applies.

How the conversion works for non-spouse beneficiaries

If you inherited an IRA from someone other than your spouse — a parent, sibling, adult child, or unrelated person — you can convert the inherited IRA to an inherited Roth IRA. The account must remain in the deceased person's name, with you listed as the beneficiary. You cannot treat it as your own IRA, and you cannot roll it into your own existing IRA or Roth.

The conversion triggers income tax on the full amount you move, calculated at your tax rate for that year. Unlike a spouse, you cannot withdraw the converted amount penalty-free before age 59½; the early withdrawal penalty applies to any money you take out before that age, with limited exceptions. You must also take required minimum distributions (RMDs) from the inherited Roth each year, based on your age and life expectancy. These distributions are tax-free because the money was already taxed when you converted it.

The SECURE Act (passed in 2019) changed the rules for non-spouse beneficiaries significantly. If you inherited the IRA after December 31, 2019, you generally must empty the entire account within ten years of the death. Converting to a Roth does not change this deadline — you still have ten years to withdraw everything. However, converting early can reduce the tax hit because you spread the income over multiple years rather than taking a large distribution all at once near the end of the ten-year window.

The tax bill: when it arrives and how much it costs

When you convert an inherited IRA to a Roth, you owe federal income tax on the full amount converted in the year you do the conversion. This is not a penalty; it is ordinary income tax at your marginal rate. If you convert $100,000, you add $100,000 to your taxable income for that year. If you are in the 24% federal tax bracket, that conversion costs you $24,000 in federal tax alone (plus any state income tax, if your state has one).

The tax is due when you file your return for that year, typically by April 15 of the following year. You must pay it from your own funds — if you withdraw money from the inherited IRA to cover the tax, that withdrawal is also taxable income, which can push you into a higher tax bracket. This is why financial advisors often recommend paying the tax from a separate bank account or investment account if you can afford to do so.

One exception: if you inherited the IRA in a year when the account holder had already taken a required minimum distribution (RMD), you can convert only the portion that was not the RMD. The RMD portion must be distributed to you as a taxable distribution, separate from the conversion. This rule prevents people from converting RMDs to Roth accounts to avoid the distribution requirement.

Timing: when you must complete the conversion

You must complete the conversion by December 31 of the year you want it to count. A conversion completed on January 2 counts for the following year. The conversion itself — the trustee-to-trustee transfer — must be initiated and completed within that calendar year. If the financial institution is slow, you should initiate the transfer well before December 31 to ensure it clears by year-end.

If you miss the December 31 deadline, the conversion counts for the following year instead. You cannot go back and convert in a prior year. However, the IRS can grant an extension to file your tax return (giving you until October 15 if you file for an extension), but this does not extend the deadline to complete the conversion itself — that deadline is still December 31.

Reasons to convert and reasons to wait

Converting an inherited IRA to a Roth makes the most sense if you expect your tax bracket to stay the same or increase in future years, or if you want to leave tax-assistance programs to your heirs. The Roth grows tax-free, and your beneficiaries inherit it tax-free. If you are in a low tax year (you took time off work, had a business loss, or retired early), converting in that year minimizes the tax bill.

Waiting or not converting makes sense if you are currently in a high tax bracket and expect to be in a lower bracket later. It also makes sense if you cannot afford to pay the tax from outside the account — withdrawing from the inherited IRA to pay the tax creates a larger tax bill and defeats the purpose of the conversion. If you inherited a very large IRA and converting it all at once would push you into a much higher tax bracket, you might convert a portion each year over several years to spread the tax burden.

Required minimum distributions and inherited Roth accounts

After you convert an inherited IRA to an inherited Roth, you must take required minimum distributions (RMDs) each year, just as you would from an inherited traditional IRA. The RMD is calculated based on your age and the IRS life expectancy table. For non-spouse beneficiaries who inherited after 2019, the entire account must be withdrawn within ten years, but you can take the distributions whenever you want during that period — you do not have to take an equal amount each year.

The distributions from an inherited Roth are tax-free because you already paid tax when you converted. This is a major advantage over an inherited traditional IRA, where distributions are taxable. If you convert early in the ten-year window, you have more time for the remaining balance to grow tax-free before you must withdraw it.

Frequently Asked Questions

Can I convert part of an inherited IRA and leave the rest as a traditional IRA?

Yes. You can convert a portion to a Roth and keep the remainder in the inherited traditional IRA. This is called a partial conversion. Many people do this to spread the tax bill across multiple years or to convert only the amount they can afford to pay tax on. Each conversion must be completed by December 31 of the year it counts.

What happens if I convert an inherited IRA and then change my mind?

You can undo a conversion by recharacterizing it — moving the money back to a traditional IRA by the tax return deadline (including extensions). However, recharacterization rules are strict, and you cannot recharacterize back and forth multiple times in the same year. Once you recharacterize, you must wait at least 30 days before converting again.

Do I have to convert the entire inherited IRA at once?

No. You can convert as much or as little as you want each year. Many beneficiaries convert a portion annually to manage the tax impact. Each partial conversion is treated as a separate transaction, and each must be completed by December 31 of the year you want it to count.

What if the inherited IRA is worth less after I convert it?

You still owe tax on the amount you converted, even if the account value drops afterward. If you converted $100,000 and the account falls to $80,000 before the tax return deadline, you still owe tax on $100,000. This is one reason to be cautious about converting large amounts in volatile markets.

Can I convert an inherited Roth IRA?

No. If you inherited a Roth IRA, it is already a Roth. You cannot convert it to anything else. You must take required minimum distributions from it each year (if you are a non-spouse beneficiary), but the distributions are tax-free.