Q. I have been considering moving TSP money into the G Fund to have it exempt from New Jersey state income tax. My search for an answer leaves me with confusing information regarding exemption from state tax which talks about “direct” obligations and qualified mutual funds which invest in federal obligations and bonds.
To summarize: Since savings bonds, etc. are exempt from state tax, and the G Fund is made up entirely of federal obligations, couldn’t that fund be exempt?
A. This is really a question for your tax preparer. All money, when withdrawn from the TSP, is considered ordinary income, and I don’t believe that you’ll get an exemption from state tax based on that argument. Nice try, though!