Correct an excess IRA contribution

An excess contribution happens when you contribute more than the IRS allows for a tax year. This can happen when your contribution:

• Is more than your eligible compensation (or your and your spouse's combined eligible compensation, if you file taxes jointly) for the year

• Is more than the IRS dollar limit for the year

• Is not allowed because your income is above the Roth IRA MAGI limit for the year

• Comes from an ineligible rollover from an employer-sponsored retirement plan

If you have an excess contribution, you need to correct it. If you do not correct it in time, the IRS charges a 6% excise tax on the excess for every year it stays in the account. To find out if you have an excess contribution, look at two things: your eligible compensation and the IRA contribution limit for the tax year.

To contribute to an IRA, you need eligible compensation from personal services in the year you received the income. The IRS says eligible compensation includes:

• Wages, salaries, tips, bonuses, and commissions

• Self-employment income

• Professional fees

• Combat pay

• Certain stipends, fellowships, and similar payments to graduate students

A Roth IRA has an extra income requirement. The IRS sets three income bands based on your Modified Adjusted Gross Income (MAGI) that determine how much you can contribute. Your MAGI needs to be at or below the limit the IRS sets for the year.

The most you can contribute each year to your IRAs — adding up traditional and Roth IRA contributions together — is the lesser of your total eligible compensation or the IRS dollar limit for the year. For 2026, the limit is $7,500 ($8,600 if you are age 50 or older). This limit changes each year with IRS cost-of-living adjustments.

Roth IRA income limits

How much you can contribute to a Roth IRA depends on your MAGI for the year. The IRS sets three income bands. If your income is at or below the lowest band, you can contribute the full annual limit, or less if your eligible compensation is less. In the middle band, you can make a partial contribution. At or above the top band, you cannot contribute to a Roth IRA for that year.

For 2026, the Roth IRA MAGI phase-out range is $153,000 to $168,000 for single filers and heads of household, $242,000 to $252,000 for married filing jointly, and $0 to $10,000 for married filing separately if you lived with your spouse during the year. These limits change each year with IRS cost-of-living adjustments.

You can correct an excess contribution by removing it or recharacterizing it. Either way, you need to do this by your tax return due date, plus extensions, to avoid the 6% excise tax. You also need to calculate the Net Income Attributable (NIA) on the excess contribution and include it with the correction.

How to remove the excess contribution

If you remove the excess contribution, you need to distribute the excess amount and any NIA on it by your tax filing due date, plus extensions.

How to recharacterize the contribution

Recharacterization moves a current-year contribution, plus the NIA, from one type of IRA to another. The tax year of the contribution does not change, and you need to be eligible to contribute to the other IRA type to recharacterize. You have until your tax filing due date, plus extensions, to recharacterize a contribution for that tax year.

Example: You contribute $7,500 to your Roth IRA. When you file your taxes, you find your MAGI is above the limit to contribute to a Roth IRA for that year. You recharacterize the $7,500 contribution, plus the NIA, to a traditional IRA for that tax year.

If you correct the excess after your tax filing deadline, plus extensions, you can carry the contribution forward to the current tax year (this is called redesignating it), as long as you are eligible to make a current-year contribution. Or you can remove the excess contribution. If you are not eligible to redesignate the excess, or choose not to, you can still distribute it. In this case, you do not calculate or distribute the NIA, and the excess is subject to the 6% excise tax for every year it stays in the account, measured as of the last day of each tax year.

You can still redesignate the excess to a later year after paying the 6% tax for the years it remained in the account. Once the excess is redesignated, the 6% tax stops for future years, but the tax you already paid is not refunded.