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Deducting an Excess Contribution in a Later Year: IRA Contributions and Transfers (2025 IRS Guide)

This guide covers “Deducting an Excess Contribution in a Later Year” within ira contributions and transfers. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs), published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Generally, an excess contribution is the amount contributed to your traditional IRAs for the year that is more than the smaller of:

  • $7,000 ($8,000 if you are age 50 or older), or

  • Your taxable compensation for the year.

The taxable compensation limit applies whether your contributions are deductible or nondeductible.

An excess contribution could be the result of your contribution, your spouse's contribution, your employer's contribution, or an improper rollover contribution. If your employer makes contributions under a SEP arrangement on your behalf to a SEP IRA, see chapter 2 of Pub. 560.

Deducting an Excess Contribution in a Later Year

You can’t apply an excess contribution to an earlier year even if you contributed less than the maximum amount allowable for the earlier year. However, you may be able to apply it to a later year if the contributions for that later year are less than the maximum allowed for that year.

You can deduct excess contributions for previous years that are still in your traditional IRA. The amount you can deduct this year is the lesser of the following two amounts.

  • Your maximum IRA deduction for this year minus any amounts contributed to your traditional IRAs for this year.

  • The total excess contributions in your IRAs at the beginning of this year.

This method lets you avoid making a withdrawal. It doesn’t, however, let you avoid the 6% tax on any excess contributions remaining at the end of a tax year.

To figure the amount of excess contributions for previous years that you can deduct this year, see Worksheet 1-5.

Worksheet 1-5. Excess Contributions Deductible This Year

  • Use this worksheet to figure the amount of excess contributions from prior years you can deduct this year.
1. Maximum IRA deduction for the current year 1. _____
2. IRA contributions for the current year 2. _____
3. Subtract line 2 from line 1. If zero or less, enter -0- 3. _____
4. Excess contributions in IRA at beginning of year 4. _____
5. Enter the lesser of line 3 or line 4. This is the amount of excess contributions for previous years that you can deduct this year 5. _____

Example.

You were entitled to contribute to your traditional IRA and deduct $1,000 in 2024 and $1,500 in 2025 (the amounts of your taxable compensation for these years). For 2024, you contributed $1,400 but could deduct only $1,000. In 2024, $400 is an excess contribution subject to the 6% tax. However, you wouldn’t have to pay the 6% tax if you withdrew the excess (including any earnings) before the due date of your 2024 return. Because you didn’t withdraw the excess, you owe excise tax of $24 for 2024. To avoid the excise tax for 2025, you can correct the $400 excess amount from 2024 in 2025 if your actual contributions are only $1,100 for 2024 (the allowable deductible contribution of $1,500 minus the $400 excess from 2024 you want to treat as a deductible contribution in 2025). You can deduct $1,500 in 2025 (the $1,100 actually contributed plus the $400 excess contribution from 2024). This is shown on Worksheet 1-5. Example—Illustrated.

Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 2025

Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 2025

Summary: This is an example of Form 5329 (2025) with items included as described in the text. Additionally, these line items are completed:

  • "Name of individual subject to additional tax. If married filing jointly, see instructions." field contains Paul Jones
  • "Your social security number" field contains 003-00-0000
  • Under"Part III: Additional Tax on Excess Contributions to Traditional IRAs":
  • "15. Excess contributions for 2024 (see instructions)"field contains 500
    "16. Total excess contributions. Add lines 14 and 15" field contains 500
    "17. Additional tax. Enter 6% (0.06) of the smaller of line 16 or the value of your traditional IRAs on December 31, 2025 (including 2025 contributions made in 2026). Include this amount on Schedule 2 (Form 1040), line 8" field contains 30
  • "15. Excess contributions for 2024 (see instructions)"field contains 500
  • "16. Total excess contributions. Add lines 14 and 15" field contains 500
  • "17. Additional tax. Enter 6% (0.06) of the smaller of line 16 or the value of your traditional IRAs on December 31, 2025 (including 2025 contributions made in 2026). Include this amount on Schedule 2 (Form 1040), line 8" field contains 30

Worksheet 1-5. Example—Illustrated

  • Use this worksheet to figure the amount of excess contributions from prior years you can deduct this year.
1. Maximum IRA deduction for the current year 1. 1,500
2. IRA contributions for the current year 2. 1,100
3. Subtract line 2 from line 1. If zero or less, enter -0- 3. 400
4. Excess contributions in IRA at beginning of year 4. 400
5. Enter the lesser of line 3 or line 4. This is the amount of excess contributions for previous years that you can deduct this year 5. 400

Closed tax year.

A special rule applies if you incorrectly deducted part of the excess contribution in a closed tax year (one for which the period to assess a tax deficiency has expired). The amount allowable as a traditional IRA deduction for a later correction year (the year you contribute less than the allowable amount) must be reduced by the amount of the excess contribution deducted in the closed year.

To figure the amount of excess contributions for previous years that you can deduct this year if you incorrectly deducted part of the excess contribution in a closed tax year, see Worksheet 1-6.

Worksheet 1-6. Excess Contributions Deductible This Year if Any Were Deducted in a Closed Tax Year

  • Use this worksheet to figure the amount of excess contributions for prior years that you can deduct this year if you incorrectly deducted excess contributions in a closed tax year.
1. Maximum IRA deduction for the current year 1. _____
2. IRA contributions for the current year 2. _____
3. If line 2 is less than line 1, enter any excess contributions that were deducted in a closed tax year. Otherwise, enter -0- 3. _____
4. Subtract line 3 from line 1 4. _____
5. Subtract line 2 from line 4. If zero or less, enter -0- 5. _____
6. Excess contributions in IRA at beginning of year 6. _____
7. Enter the lesser of line 5 or line 6. This is the amount of excess contributions for previous years that you can deduct this year 7. _____

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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