Putting too much into an IRA or HSA triggers its own annual penalty — a 6% excise tax that repeats every year the excess remains uncorrected.
How it works
The penalty is 6% of whichever is smaller: the excess contribution amount, or the account’s value at year end.
What this does not include
This computes a single year’s penalty — an uncorrected excess triggers this same 6% tax every year it remains in the account, meaning the total cost compounds the longer correction is delayed.
How to use this calculator
- Enter the excess contribution amount and the account value at year end.
Frequently asked questions
How can an excess contribution be corrected?
Withdrawing the excess contribution (and any earnings attributable to it) before the tax filing deadline avoids the 6% excise tax entirely for that year.
Why is the penalty based on account value, not just the excess amount?
If investment losses have reduced the account below the excess contribution amount, the penalty is capped at what’s actually left in the account rather than the original excess dollar figure.
Does this apply the same way to both IRAs and HSAs?
Yes — both use the identical 6% excise tax structure for uncorrected excess contributions, reported on Form 5329.
