What this line means
The 6% excise tax on excess contributions to your traditional IRA. Multiply the excess amount on line 17 by 0.06. For a $2,000 excess contribution, the tax is $120. This penalty applies every year the excess remains in the account, creating a recurring charge until you correct the problem.
Does this apply to you?
- You have excess traditional IRA contributions that were not withdrawn before the filing deadline
- You had carryover excess contributions from a prior year that remain uncorrected
- You owe the annual 6% penalty on the excess amount sitting in your traditional IRA
Easy to overlook
The 6% tax is capped at 6% of your total IRA value The excise tax on excess contributions cannot exceed 6% of the fair market value of all your traditional IRAs at year-end. If your total traditional IRA balance is $3,000 and the excess contribution is $5,000, the tax is $180 (6% of $3,000), not $300 (6% of $5,000). This cap matters when IRA balances are small relative to the excess. 1 IRS Form 5329 instructions — Line 20
Absorbing the excess by undercontributing in a future year stops the penalty If you contributed $9,000 in 2024 (excess of $2,000) and contribute only $5,000 in 2025, the $2,000 shortfall absorbs the prior-year excess. You owe the 6% tax for 2024 but not for 2025. This is often simpler than withdrawing the excess and its earnings. 2 IRS Publication 590-A — Contributions to IRAs
Watch out for this
Filing Form 5329 for only the current year when you have carryover excess from prior years. If you over-contributed in 2023 and did not fix it, you owe the 6% tax for 2023, 2024, and 2025. Each year requires either a Form 5329 filed with your return or a standalone Form 5329 for that tax year. Missing prior years means unpaid penalties plus potential interest.
Footnotes
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IRS Form 5329 Instructions, Line 20. https://www.irs.gov/instructions/i5329 ↩
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IRS Publication 590-A, Contributions to Individual Retirement Arrangements. https://www.irs.gov/pub/irs-pdf/p590a.pdf ↩