Personal Finance (Not Investing) • Contributed too much to my Roth IRA

I'm doing my taxes and just found out that I contributed too much to my Roth IRA based on my income.

TurboTax is telling me:

Because your MAGI is $XXX,XXX, only $5,000 of your $6,500 contribution is allowed. The difference of $1,500 is considered an excess contribution.

My understanding is that I can either withdrawal the $1,500 + gains and pay taxes on the gains, or I can recharacterize the $1,500 + gains to a Traditional IRA, and then the gains are not taxed.

However, my ultimate goal is to move the $1,500 + gains to a Traditional IRA and then do a backdoor and convert it back to a Roth IRA (this is so dumb to me). What amount would I be able to convert back to the Roth IRA? Could I convert the gains too? Or is there a limit on how much you can convert?

So, if I leave the allowed $5,000 in the Roth IRA -- can I then recharacterize the $1,500 + gains to a Traditional IRA, and then convert it back to a Roth IRA? Or would I only be able to convert the $1,500 and the gains would need to stay in the Traditional IRA?

Appreciate any insight...

Statistics: Posted by OverAnalyze — Fri Mar 01, 2024 6:45 pm — Replies 4 — Views 293

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