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This fellowship income is not eligible compensation for making an IRA contribution unless it is reported to you in box 1 of a W-2. Since this was not W-2-reported income and you had no other eligible compensation, your IRA contribution is an excess contribution. Since this is your only contribution to this IRA account, you'll need to request a return of the contribution that you made. The custodian must distribute the original contribution adjusted for any earnings or loss while in the IRA. Since this was your only contribution, the entire account balance will be distributed.
Having the contribution returned will avoid the 6% penalty for each year that the excess contribution remains in the account.
Given that this thread surfaces in Google search results, can you please update the advice here if applicable? I believe it has changed.
The information in the reply above is still accurate for tax years through 2019. Fellowship income is not eligible compensation for making an IRA contribution unless it is reported to you in box 1 of a W-2.
You can't contribute more than the taxable compensation you have each year. And if you contribute too much, you could be subject to penalties in the form of a 6% tax charged by the IRS on excess contributions that aren't withdrawn by the date your tax return is due.
There was legislation passed in December of 2019 that changes the above. For tax years beginning after December 31, 2019 (Jan 1, 2020), certain taxable non-tuition fellowship and stipend payments are treated as compensation for the purpose of IRA contributions. Compensation will include any amount included in your gross income and paid to aid in your pursuit of graduate or postdoctoral study.
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