Best way to correct over-contribution to self-directed Roth IRA?

[Eric Chase]

BP Community, can you provide advice???

I contributed the max ($6,000) to my SD Roth IRA in May, knowing my (combined with my wife's) AGI for 2020 would be under the $196K threshold. I then lent out this $6,000 along with my entire IRA balance to a fund with compounding interest. Today, due to my tenants getting unexpected military orders, I've learned that I need to sell a rental property several months earlier than expected. My intent was to sell this property anyway, but with a closing after 1 Jan 2020. Now, the sale will close this year and I expect a significant capital gain that will put my 2020 AGI over $206K. Thus, I will not be eligible to contribute to a Roth IRA at all this year.

What’s the best way to get myself right with the IRS when I file next year?

[Glenna Wood]

Any chance you can 1031 your rental to carry the gain forward? If you can't, 2) above from Mr. McElroy above would be my choice. It's just an extra form in your return. Kudos for contributing to your IRA sooner rather than later! Best wishes.