OVERVIEW

  • The contribution limits for a Traditional IRA and Roth IRA are $7,000 ($8,000 if you’re age 50 or older) in both 2024 and 2025. Any contributions beyond these limits are considered excess contributions and they should be corrected as soon as possible.
  • If not fixed, you’ll owe a 6 percent excise tax on the excess amount each year it remains in your account.
  • If you haven’t filed your taxes yet, withdrawing the excess contributions before the tax deadline could help you avoid this penalty. If you’re under age 59 1⁄2, the 10 percent early withdrawal penalty typically applies only to the earnings on the excess, not to the excess contribution itself.
  • If you already filed your taxes, you generally have until the October extension deadline to correct the issue and file an amended tax return.  In this case, you may also owe the 10 percent early distribution penalty on the earnings if you’re under 59½.
  • You also have the option to carry over the excess into the next tax year. You’ll usually owe the 6 percent excise tax once, and the excess amount can count toward next year’s contribution limit.

An IRA overcontribution happens when you contribute more than the IRS limit for the year to a Traditional or Roth IRA. This may happen if you miscalculate your contribution or change your mind about how much to add.

If you contribute more than the maximum amount to a Traditional or Roth IRA, you may be subject to penalties.

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Here’s how to spot and fix excess IRA contributions.

Table of contents

IRA Contribution Limits

For both 2024 and 2025, the total IRA contribution limit is $7,000, or $8,000 if you’re age 50 or older. You generally can’t contribute more than this combined amount to all your IRAs (Traditional and Roth combined).  You’re also limited by your taxable compensation for the year—whichever is less: your income or the contribution limit. 

Any amount above the limit is considered an excess contribution. 

✏️ Hypothetical Example: If your total income in 2024 was $3,000, that’s also the maximum you could contribute to an IRA.

What Are the Penalties for Excess IRA Contributions?

If you don’t correct your excess IRA overcontributions, you’ll generally owe a 6 percent excise tax each year the excess remains in your account. This tax applies only to the excess —not your entire IRA balance. 

If you’re under age 59½ and not eligible for qualified distributions, you might also owe a 10 percent early withdrawal penalty—but only on the taxable portion of the correction, not the excess contribution itself.

How Does the IRS Know You Overcontributed?

Your IRA plan provider is required to report your annual contributions to the IRS each year, so excess amounts can be flagged easily during tax processing.

How to Correct Excess IRA Contributions

The correction process depends on whether you’ve already filed your tax return or not.

📌 If You Spot the Error Before You File Your Taxes

Step 1: Withdraw the excess contributions as soon as possible

Contact your IRA custodian and request to remove the excess contributions along with any earnings. The earlier you act, the better.

Step 2: Pay taxes on any earnings

If the excess generated earnings, those are generally considered taxable income if you’re under age 59½. The 10 percent early withdrawal penalty may also apply to the earnings.

When is the Deadline?

As long as you withdraw the excess by the April 15 tax deadline, you generally won’t owe the 6 percent excise tax. You can also file for an extension, which gives you until the October deadline to make the correction.

📌 If You Spot the Error After You File Your Taxes

If you’ve already filed, you still have a few ways to fix the problem:

Option 1: File an amended tax return by the October extension deadline

If you filed your taxes in April, you can still withdraw the excess amount and any earnings by October, then file an amended tax return. This helps you avoid the 6 percent excise tax. However, earnings are still subject to ordinary income tax, and if you’re under age 59 ½, the 10 percent early withdrawal penalty may also apply.

Option 2: Carry over the excess amount into next year

You also have the option to leave the excess money in your account, pay the 6 percent excise tax once, and let the excess count toward next year’s contribution limit. This helps avoid continued penalties, but it still requires careful tracking.

Option 3: Withdraw the amount next year

Alternatively, you could leave the excess in your account and withdraw it the following year. As long as you withdraw the excess by December 31 of the following year, you won’t be charged with an additional 6 percent excise tax.

Option 4: Recharacterize your IRA contribution

If the excess came from a Roth IRA and your income exceeds Roth limits, you can ask your custodian to recharacterize the contribution as a Traditional IRA contribution. This must include any earnings and must be completed before the tax deadline. Doing so may help you avoid both the 6 percent excise tax and the 10 percent early withdrawal penalty.

This approach is especially helpful if your income exceeded the Roth IRA eligibility limits and you made a contribution error. 

📌 Also read: How to Fix Overcontributions to a 401k

How Do Overcontributions Happen?

Mistakes with IRA contributions are fairly common. Here are some of the main causes:

Reason #1: Roth IRA Income Limit

Roth IRAs have income limits. If your income exceeds the threshold, you’re generally not eligible to contribute directly. 

Traditional IRAs do not have income limits for contributions.

Reason #2: Contributions to Multiple IRAs

You’re allowed to contribute to both a Traditional IRA and Roth IRA. Some people mistakenly believe that having two accounts means you get the full contribution room for each account. However, your combined contributions across all IRAs cannot exceed the annual limit. 

✏️ Hypothetical Example: If you’re under 50 and contribute $3,000 to a Roth IRA, you can only add $4,000 more to a Traditional IRA for that year, bringing your total to the $7,000 limit.

Reason #3: Automatic Investments

Automatic monthly contributions can accidentally push you over the limit if you don’t adjust the settings or track them closely.

Reason #4: Contributing More Than You Earn.

You’re only allowed to contribute up to the amount of your taxable earned income. 

✏️ Hypothetical Example:  If you earn only $5,000 in 2025, that’s also your maximum allowable IRA contribution—even though the IRS limit is higher.

Wrap-Up & Next Steps

Excess IRA contributions can happen for several reasons—whether it’s exceeding the annual limit, contributing more than you earned, or overlooking Roth IRA income thresholds. 

While the IRS imposes a 6 percent excise tax on uncorrected excesses, there are generally multiple ways to fix the issue depending on when you catch the error.

✅  If you identify the error before filing your tax return, withdrawing the excess plus earnings is usually the best route.
✅ If you catch it after filing, consider options like amending your return, carrying the excess to next year, or recharacterizing the contribution.

📝 Tip: Keep a close eye on your contributions throughout the year—especially if you automate deposits or use more than one account. And since IRA rules can be complex, consulting a qualified tax professional may help you avoid further penalties. 

📌 Want to better understand your retirement plan options or contribution strategies? Check out these articles:

Disclaimer:

The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.

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