What happens if I repay an early distribution?
When you take money out of your IRA before turning 59 1/2, it's an early distribution. Most of the time when you put money into your IRA, after taking an early distribution, that amount would count as a regular contribution for 2025.
However, if you put money back into your IRA after taking a distribution for reservists serving on active duty for at least 180 days, the repayment needs to be handled a little differently.
You won't get a deduction for that amount because you would have already received a deduction when you first made the contribution. But you also won't get a penalty even if your total contribution plus the repayment amount exceeds the yearly contribution limit. That repayment amount will also increase the basis of your IRA.
However, if you put money back into your IRA after taking a distribution for reservists serving on active duty for at least 180 days, the repayment needs to be handled a little differently.
You won't get a deduction for that amount because you would have already received a deduction when you first made the contribution. But you also won't get a penalty even if your total contribution plus the repayment amount exceeds the yearly contribution limit. That repayment amount will also increase the basis of your IRA.
