Excess Roth IRA contributions are taxed at 6% per year for every year they remain in the account. The fix is straightforward — withdraw the excess before your tax filing deadline — but ignoring it creates a recurring annual penalty.
2026 Roth IRA Limits
| Category | Contribution Limit |
|---|---|
| Under age 50 | $7,000 |
| Age 50 and older | $8,000 |
| Combined IRA limit (traditional + Roth) | $7,000 / $8,000 |
Income Phase-Outs (2026)
| Filing Status | Full Contribution | Reduced Contribution | No Contribution |
|---|---|---|---|
| Single / Head of household | Under $150,000 | $150,000 - $165,000 | Over $165,000 |
| Married filing jointly | Under $236,000 | $236,000 - $246,000 | Over $246,000 |
| Married filing separately | $0 | $0 - $10,000 | Over $10,000 |
How Excess Contributions Happen
| Scenario | How It Happens |
|---|---|
| Income exceeds phase-out | You contributed the full amount but earned too much |
| Contributed to both traditional and Roth | Combined exceeds the annual limit |
| Income dropped below zero | No earned income = no IRA contribution allowed |
| Rollover mistake | Rolled over too much from another account |
| Misunderstood the limit | Thought the limit was per account, not per person |
The 6% Penalty
$3,000 excess contribution, not corrected:
| Year | Excess in Account | 6% Penalty | Cumulative Penalty |
|---|---|---|---|
| Year 1 | $3,000 | $180 | $180 |
| Year 2 | $3,000 | $180 | $360 |
| Year 3 | $3,000 | $180 | $540 |
| Year 5 | $3,000 | $180 | $900 |
| Year 10 | $3,000 | $180 | $1,800 |
The penalty recurs every year. A $3,000 mistake costs $1,800 over 10 years if not corrected.
How to Fix It
| Method | Deadline | Details |
|---|---|---|
| Withdraw excess + earnings | Tax filing deadline (+ extensions) | Best if caught early. Earnings are taxed + 10% penalty if under 59½ |
| Recharacterize as traditional IRA | Tax filing deadline (+ extensions) | Convert the excess into a traditional IRA contribution |
| Apply to next year | Before next year’s filing deadline | Reduce next year’s contribution by the excess amount |
| Absorb with reduced contribution | Ongoing | If income allows, contribute less next year |
Step-by-Step: Withdraw Excess Contributions
| Step | Action |
|---|---|
| 1 | Contact your IRA custodian (Fidelity, Vanguard, Schwab, etc.) |
| 2 | Request a “return of excess contributions” |
| 3 | Custodian calculates the excess plus net income attributable (NIA) |
| 4 | Excess + NIA is distributed to you |
| 5 | Report the excess on Form 5329 (Part IV) |
| 6 | Pay tax on the NIA (and 10% penalty on NIA if under 59½) |
| 7 | No penalty on the original excess amount |
Backdoor Roth IRA Alternative
If your income exceeds the Roth IRA phase-out:
| Step | Action |
|---|---|
| 1 | Contribute to a traditional IRA (non-deductible) |
| 2 | Convert the traditional IRA to a Roth IRA |
| 3 | Pay tax on any gains between contribution and conversion |
| 4 | No income limit on conversions |
Warning: The pro-rata rule applies if you have existing traditional IRA balances. The conversion is taxed proportionally across all your traditional IRA funds.
The Bottom Line
If you’ve over-contributed to a Roth IRA, withdraw the excess plus earnings before your tax filing deadline to avoid the 6% annual penalty. If your income is too high for direct Roth contributions, use the backdoor Roth strategy instead. Check your income against the phase-out limits each year before contributing.
Related: What Happens If You Over-Contribute to Your 401(k)? | What Happens If You Withdraw 401(k) Early?