I contributed $7000 to trad IRA but can only deduct $5000 of it. Can I withdraw that $2000 prior to filing?

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@rrb-burke wrote:

Thanks! Is there any real disadvantage to just leaving that $2000 non-deductible portion in there?  I know I must file the form 8606. Thank you so much.

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(First, let me mention this would not be a normal withdrawal, it must be processed as a "return of excess contributions."  The custodian must also return any earnings that are attributed to the excess contribution, and those earnings are taxable income.)

It's a matter of paperwork.  If you don't plan on doing any Roth conversions (such as, to allow you to do a backdoor Roth IRA sometime later in your life), then you will keep that non-deductible basis for as long as you have any traditional IRAs (well into retirement).  You might end up with a situation where you have several hundred thousand dollars in an IRA, of which $2000 is non-deductible basis, meaning that 1% or less of your withdrawal is non-taxable, and you have to keep track of it forever.   If you don't mind the paperwork, then the non-deductible contribution will continue to grow.

If your income makes you eligible for a Roth IRA, it would make more sense to recharacterize that $2000 as a Roth IRA contribution.  It's still not deductible this year, but it grows tax free and is never taxed in withdrawal, either.  Here are the contribution limits.

https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2024