What this line means
The amount of excess contributions in your traditional IRA at the end of the year. For 2025, the IRA contribution limit is $7,000 ($8,000 if age 50 or older). Any amount you contributed above the limit — or contributed when you were not eligible — is an excess contribution subject to a 6% penalty tax each year it remains in the account.
Does this apply to you?
- You contributed more than $7,000 ($8,000 if age 50+) to your traditional IRA for the year
- You contributed to a traditional IRA when you had no eligible compensation
- You had excess contributions from a prior year that you did not withdraw or absorb
- You made a rollover that did not qualify, creating an excess contribution
Easy to overlook
Excess contributions carry forward and are taxed 6% every year If you contributed $9,000 to your traditional IRA (limit $7,000), the $2,000 excess is taxed 6% ($120) every year until you fix it. You fix it by withdrawing the excess plus earnings before the tax filing deadline, or by contributing less in a future year to absorb the excess. Leaving it untouched means paying the 6% penalty annually. 1 IRS Publication 590-A — Contributions to IRAs
You can withdraw excess contributions penalty-free before the filing deadline If you remove the excess contribution and its earnings before your tax return due date (including extensions), the excess is treated as if it was never contributed. You owe income tax on the earnings withdrawn, but no 6% excise tax. Missing this deadline locks in the penalty for the year. 2 IRS Form 5329 instructions — Part III
Watch out for this
Counting employer SEP or SIMPLE IRA contributions toward the $7,000 personal IRA limit. Employer contributions to SEP-IRAs and SIMPLE IRAs have separate, higher limits and do not reduce your $7,000 personal IRA contribution limit. Conversely, your personal IRA contributions do not count against SEP or SIMPLE limits. Confusing these limits leads to incorrect excess calculations.
Footnotes
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IRS Publication 590-A, Contributions to Individual Retirement Arrangements, Excess Contributions. https://www.irs.gov/pub/irs-pdf/p590a.pdf ↩
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IRS Form 5329 Instructions, Part III. https://www.irs.gov/instructions/i5329 ↩