I made the mistake of fully funding my 2024 and 2025 Roth IRA before calculating my 2024 AGI (I had some interest income that bumped me over the limit). As a result I over contributed to my 2024 Roth IRA by $2,490. The penalty is $150 (6%) if I do not correct by April 15th.
The market has tanked since I put those funds in so I am hesitant to sell funds to withdraw the $2,490.
Should I just pay the $150 and then reallocate the $2,490 to my 2026 Roth IRA between Jan 1st and April 15th 2026?
You have until Oct 15 if you file by Tax Day or request an extension.
if you ar partly allowed a contributon, and ask for return of only excess "contributions plus earnings" back (2,490), you must add a fudge factor
for the earnings which if positive, increase your MAGI for Roth purposes leaving you still with an excess.
To offset with an avilable contribution you must be allowed to make that contribution.
Since you already contributed for 2025 that money is no longer available as an offset for 2024
If you wait until after Oct 15, any earnings on a 2024 excess will remain in the Roth IRA. you will pay 6% a year until you take the excess out
Please be aware, you will pay the 6% penalty each year the excess contribution isn't resolved. If you aren't able to apply the excess to 2025 then you will pay the 6% penalty on your 2024 and 2025 return.
Note, if you apply the excess to 2026 this is only done through your tax return. Do not contact your financial institution to apply the excess to a following year. Leave the funds in the Roth IRA. In your 2026 tax return:
Please see What if I made an excess Roth IRA contribution for additional options.