Retirement · Fix-It Guide
Excess Roth IRA Contribution: Panic to Plan
A raise, a bonus, an RSU vest — and suddenly your MAGI cleared the Roth phase-out ceiling. Here's how to compute what's actually "excess," fix it before the deadline without the 6% excise, and avoid the classic mistakes.
Why this happens
You set up monthly Roth contributions in January based on last year's income. Then a mid-year raise, a bonus, or an RSU vest lands. By December your MAGI is higher than you expected — and some or all of what you contributed is now "excess." It's one of the most common corrections in retirement planning, and it's fixable if you act before the deadline.
Are you actually over?
The Roth phase-out is a linear band, not a cliff. If your MAGI lands inside the band, only a portion of your contribution is excess — the rest can stay.
Income is not the only cap. Your Roth limit is the lesser of the annual dollar limit or your taxable compensation for the year, minus anything you contributed to traditional IRAs for the same year (Pub. 590-A). With no earned income (and no spouse's compensation on a joint return), the whole contribution is excess, whatever your MAGI.
| Filing status | 2026 phase-out band | 2025 phase-out band |
|---|---|---|
| Single / HOH / MFS who did not live with spouse at any time during the year | $153,000 – $168,000 | $150,000 – $165,000 |
| Married filing jointly / qualifying surviving spouse | $242,000 – $252,000 | $236,000 – $246,000 |
| Married filing separately, lived with spouse at any time during the year | $0 – $10,000 | $0 – $10,000 |
Constants sourced from IRS Notice 2025-67 (2026) and Notice 2024-80 (2025). The reduction rounds down to the nearest $10 (§219(g)(2)(C), applied by §408A(c)(3)), so the allowed amount rounds up to the nearest $10 (Pub. 590-A Worksheet 2-2, line 8), with a $200 floor.
Three ways to fix it
1. Withdraw + NIA (timely)
Pull the excess and its earnings out of the Roth by your return's due date including extensions — April 15 of the following year, or October 15 if you extend. Filed on time without extending? You still have until October 15, then file an amended return marked "Filed pursuant to section 301.9100-2". NIA is ordinary income; no 10% penalty. Cleanest option if you don't need Roth space next year.
2. Recharacterize → Backdoor
Move the excess (plus NIA) to a Traditional IRA, then convert it back via a Backdoor Roth. Best when your income is permanently above the direct-Roth ceiling — check with the eligibility checker. This cures an excess caused by the Roth income limit only. If you went over the annual IRA limit or your taxable compensation, moving the money to a traditional IRA leaves the same excess there — withdraw it instead.
3. Absorb + 6% excise
Leave the excess in the account and let future contribution room "absorb" it, paying 6% each year until it's soaked up. Rarely optimal.
Worked example: NIA on a $7,000 excess
Assume the account held $50,000 immediately before you made a $7,000 excess contribution, and today it's worth $60,000. No other contributions or distributions since.
The $368.42 NIA is taxable as ordinary income for the contribution year. There is no 10% early-withdrawal penalty on this amount for a timely correction.
Stale-internet warning: SECURE 2.0 §333
Older articles say the 10% early-withdrawal penalty applies to the NIA on a timely corrective distribution. That was true — until SECURE 2.0 §333 (effective for any IRS determination made on or after December 29, 2022 — even for a correction made earlier) eliminated the 10% penalty on those earnings. You still owe ordinary income tax on the NIA; you no longer owe the 10%.
Form 5329 and recharacterization mechanics
- Timely withdrawal + NIA — the custodian issues a Form 1099-R the following January with code J and 8 (or PJ for a prior-year correction). Report the NIA as ordinary income for the year of the contribution.
- Recharacterization — instruct the custodian to move the excess plus its NIA to a Traditional IRA (this can be at the same institution). The Traditional IRA contribution is then either deductible or non-deductible depending on your MAGI and workplace-plan coverage. Report the recharacterization on your return.
- Missed the deadline — file Form 5329 (Additional Taxes on Qualified Plans) with a 6% excise tax for each year the excess remains. The tax is 6% of the LESSER of the excess or the total value of all your Roth IRAs on December 31.
Common pitfalls
Frequently asked questions
I contributed to a Roth but my income ended up too high — what now?
You can fix it without the 6% excise tax until your return's due date including extensions — April 15 of the following year, or October 15 if you extend. If you file on time without extending, you still have until October 15, but you then file an amended return marked "Filed pursuant to section 301.9100-2". Two clean paths: (1) withdraw the excess plus its earnings (NIA) or (2) recharacterize the excess to a Traditional IRA — which sets you up for the Backdoor Roth if your income stays too high. Recharacterizing cures an excess caused by the Roth income limit only; if you went over the annual IRA limit or your taxable compensation, withdraw the excess instead.
How do I calculate earnings on an excess contribution?
Treasury Reg. §1.408-11 defines Net Income Attributable (NIA) as Excess × (Adjusted Closing Balance − Adjusted Opening Balance) ÷ Adjusted Opening Balance. AOB is the balance just before the deposit that contained the excess, plus that whole deposit (not just its excess part), plus any other contributions/transfers-in received since; ACB is today's balance plus any distributions taken since. In the regulation's own example, $400 of a $1,600 deposit into a $4,800 IRA comes back when the IRA is worth $7,600: AOB $6,400, NIA $75. If you made several deposits for the year, the last one is treated as the excess first.
Is there a penalty for fixing it before the deadline?
The NIA is taxable as ordinary income for the year of the contribution — but the 10% early-withdrawal penalty NO LONGER applies to the NIA on a timely correction. SECURE 2.0 §333 (effective for any IRS determination made on or after December 29, 2022 — even for a correction made earlier) removed that penalty. A lot of older internet content is stale on this.
What if my account LOST money since the contribution?
NIA can be negative. In a market-loss case you withdraw LESS than the excess — the same regulation applies whether gains or losses occurred.
What is the 6% excise tax?
IRC §4973 imposes a 6% tax for each year an excess contribution remains in the account, applied to the LESSER of the excess or the total value of all your Roth IRAs on December 31. It's reported on Form 5329 and applies again for each year the excess stays in the account, until you either withdraw the excess or absorb it against a future year's contribution room.
Sources & References
Primary references used for this content
IRS Publication 590-A — Contributions to IRAs
Treas. Reg. §1.408-11 context, excess contribution rules, and correction mechanics.
View on irs.gov
About Form 5329 — Additional Taxes on Qualified Plans
Reports the 6% excise tax on uncorrected excess contributions.
View on irs.gov
SECURE 2.0 Act of 2022 §333 — 10% penalty relief for timely NIA
Eliminates the 10% early-withdrawal penalty on earnings withdrawn as part of a timely corrective distribution.
View on congress.gov
✓3 primary sources; links re-checked on a weekly rotation by the source watcher
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