An excess IRA contribution costs 6% of the extra amount for every year it stays in the account. At Rank and Pay, we tie every contribution limit on this site to the number the Internal Revenue Service (IRS) sets for that tax year. Miss the correction deadline and that 6% keeps charging, year after year, until you fix it.
What Counts as an Excess IRA Contribution
An excess contribution happens the moment your combined Traditional and Roth IRA deposits for the year cross the annual limit the IRS sets. For 2026, that limit is $7,500, up from $7,000 in 2025. Savers who are 50 or older by year-end get an extra $1,100 catch-up contribution, for a combined total of $8,600. The IRS announced both figures alongside the 2026 TSP limit.
The cap applies across every IRA you own, added together. Putting $5,000 into a Traditional IRA and $3,000 into a Roth IRA in the same year totals $8,000, which is $500 over the 2026 limit for anyone under 50. The IRS does not care which account holds the extra money. It only cares about the combined total.
The Roth Income Trap Creates an Excess Contribution with No Dollar Mistake
A Traditional IRA has no income ceiling, but a Roth IRA does. The IRS phases out your allowed Roth contribution as your Modified Adjusted Gross Income (MAGI) rises through a set range, and above the top of that range you cannot contribute to a Roth IRA at all that year. For 2026, the range runs $153,000 to $168,000 for single filers and $242,000 to $252,000 for married couples filing jointly.
This is where military pay creates a trap civilian guides do not cover. A reenlistment bonus, a drill-pay-heavy year for a reservist, or a spouse's promotion can push household MAGI across that line after the Roth contribution already sits in the account. Nothing about the contribution amount changed. The income around it did, and that alone turns a fully valid $6,000 Roth deposit into an excess one. Check your projected MAGI before year-end if a bonus or a second income is on the calendar, not just your contribution total.
The Math Behind the 6% Excise Tax
Say you contribute $500 more than the 2026 limit and never correct it. The IRS charges 6% of that $500, or $30, on your tax return for that year. Leave it in the account a second year and you owe another $30. The tax applies every single year the excess principal remains, capped only at 6% of whichever is smaller: the excess amount or your account's year-end value.
Small numbers compound into a real cost over time. A $500 excess left in place for five straight years runs $150 in excise tax alone, on top of whatever tax you eventually owe when you withdraw the money as a normal distribution. None of that $150 buys you anything. It is a pure penalty for a correction you could have made for free.
How to Fix an Excess Contribution Before the Deadline
Call your IRA custodian and ask for a corrective distribution of the excess amount, along with any earnings that excess portion generated, before your tax-filing deadline for that year, including any extension you filed.
- Confirm the exact excess dollar amount across every IRA you hold, not just the account where you think the mistake happened.
- Ask your custodian specifically for a "corrective distribution" or "return of excess contribution," since a regular withdrawal request will not carry the same tax treatment.
- Report the returned earnings as taxable income for the year you actually receive them, using your custodian's Form 1099-R.
- File Form 5329 with your tax return only if you missed the deadline and still owe the 6% excise tax for that year.
Get the corrective distribution processed before your deadline and the excise tax never applies at all. The earnings still count as income in the year you get them back, but the principal itself comes out clean.
What Happens If You Miss the Deadline
The 6% excise tax locks in for that tax year the moment your deadline passes, and it keeps applying every year afterward until the excess is gone from the account. You still have two ways to stop the bleeding. Withdraw the excess as a late corrective distribution, which stops future years' tax even though it does not undo what you already owe. Or, if your contribution room opens up in a later year, apply the old excess against that year's limit instead of making a new contribution, which absorbs it without a separate withdrawal.
Neither option is free. Both beat leaving the excess in place indefinitely, since the 6% tax has no cap on how many years it can apply.
Does Rolling TSP Into an IRA Count as a Contribution?
No. A rollover from TSP into a Traditional IRA at separation does not count against your $7,500 contribution limit, no matter how large the rolled-over balance is. The IRS treats a rollover as moving existing retirement money, not as a new contribution. Confusing the two is a common, avoidable mistake. A veteran who rolls a $200,000 TSP balance into an IRA the same year they also contribute $6,000 in new money has made a $6,000 contribution, not a $206,000 one, and stays well under the limit either way.
What If You Already Filed Your Tax Return?
You still have a path to fix it. If you catch the excess after filing but before the October extension deadline, file an amended return along with the corrective distribution request to your custodian. Missing even that extended window locks in the 6% excise tax for that tax year, though it does not add a separate late-filing penalty on top of the excise tax itself, since Form 5329 can still be filed on its own in a later year to report and pay it.
The Spousal IRA Rule Is a Second Common Trigger
A non-working or lower-earning military spouse can still contribute to an IRA under the spousal IRA rule, based on the working spouse's income rather than their own. The trap shows up when a spouse's part-time civilian income grows during a PCS move or a deployment cycle, and a family keeps contributing at the same level without rechecking whose income now counts and how much room is actually left. Recheck both spouses' contribution room separately each year a household income changes, since the spousal IRA rule does not raise the $7,500 combined per-person limit, it only changes whose earnings qualify a non-working spouse to use it.
Why This Rarely Happens Inside a TSP Account
The Thrift Savings Plan (TSP) works differently. TSP payroll systems cut off your own contributions the instant you hit the elective deferral limit, so a true excess almost never happens inside TSP alone unless you are combining it with a separate civilian 401(k) in the same year. An IRA has no such cutoff. Your custodian will accept a contribution past the limit without stopping you, and a Roth IRA's income phase-out has no TSP equivalent at all. That difference is the reason IRA excess contributions catch people who would never over-contribute to TSP on its own.
Who This Is Not For
If your only retirement account is TSP and you have no separate IRA, none of this applies to you; the TSP-specific mechanics on our TSP excess-contribution page cover your situation instead. This guidance also does not fit someone who deliberately over-funded a Traditional IRA as a short-term parking spot before a planned Roth conversion. That situation calls for a recharacterization conversation with a tax professional, not a corrective withdrawal, since pulling the money back out defeats the plan.
What Would Change This Answer
A late-arriving 1099 or a year-end bonus that revises your MAGI estimate after you already contributed changes which fix applies. If your income turns out lower than expected and you were never actually over the Roth limit, no correction is needed at all, so recheck your final MAGI before paying a custodian to reverse a contribution you did not need to reverse. A missed filing-deadline extension also changes the math, since requesting an extension pushes your correction window back with it.
Confirm your combined IRA total across every account you hold before your filing deadline, and call your custodian the same week if you are over. See the TSP excess contribution penalty guide for the payroll-plan version of this same problem, or compare account types directly at TSP vs IRA for military.
This page is general information, not legal or financial advice. Verify your specific contribution limits and correction deadline with the IRS or your finance office before acting.