Did 2025 turbotax desktop miscalculate on ROTH IRA contribution penalty?

[btu727]

From IRS page -
For 2025, the Roth IRA contribution limit is $7,000 for those under age 50, and $8,000 for those age 50 or older. Eligibility to contribute depends on your 2025 Modified Adjusted Gross Income (MAGI), with phase-out ranges starting at $150,000 for singles and $236,000 for married couples filing jointly

We are filing 2025 as married couples filing jointly
- I have retirement plan at work (403 and 457) and my wife does not
- She is under 50 and contributed $7000 into traditional IRA for 2025
- I am over 50 and contributed $8000 for ROTH IRA for 2025

Why does turbotax say I have excess contributions of $8000 when our taxable income on federal review page is $208,418 after all the deductions and make it pay the penalty? Could there be a bug that the software that mess up the penalty because I have both 403 & 457?

[AnnetteB6]

Taxable income and Modified Adjusted Gross Income (MAGI) are not the same thing.  Your taxable income will take deductions into account and is therefore lower than the starting point for the MAGI which is the AGI on line 11a of Form 1040.  

Here is a link to the IRS worksheet for Modified Adjusted Gross Income (MAGI) calculation to determine if a Roth IRA contribution can be made:  IRS Publication 590-A

TurboTax does the calculation shown in the IRS worksheet and then gives you information on screen about whether you can make the Roth IRA contribution based on the MAGI.
 

[btu727]

My mistake for misunderstanding MAGI vs taxable income. I do have another question. I just did a return of excess of ROTH IRA contribution for 2025 (principle and loss in this case).  I did the contribution on 12/2/2025 and part of the loss would be for 2025 and did the return today 4/13/2026.  Do I need to report the ROTH IRA contribution for 2025 tax year since I already backed out the contribution?

[RobertB4444]

You should report the excess contribution.  When you do the system will point out that you made an excess contribution and ask if you withdrew it by the due date of the return.  You will answer yes and then it will get reported on the tax return so that the IRS knows you did what you were supposed to do and they shouldn't chase you for the penalties.

In addition, for 2026 you are going to get a 1099-R reporting the amount that you withdrew.  As long as it is the same amount that you reported on your 2025 return you will be able to ignore that 1099-R.