Browsing: tax-exempt status

Combat pay, TSP and 401(k)


Q. I am retiring from active duty in about six months. Almost one-third of my Thrift Savings Plan balance is from combat-zone tax-exempt contributions. I am looking to possibly roll my TSP into my next employer’s 401(k). What happens to the CZTE amount? How do I keep this amount tax exempt, and what are my options for this amount at retirement? A. Given that the TSP is the best retirement investment environment you will find, I urge you to consider maintaining your TSP account and maximizing its use for as long as possible. Unless there are some extraordinary circumstances, you…

Combat-zone tax-exempt contributions


Q. I have both a civilian and military Thrift Savings Plan account because I was mobilized for part of 2011-12. Because I was in a combat zone, much of my income was tax exempt (CZTE). The military allowed me to contribute that tax-exempt income into my TSP. It is not a tax deduction because the income wasn’t taxable in the first place. However, they also made contributions from my taxable income. I thought it was all from my CZTE. When I returned to my civilian job, I began to contribute and maxed out my contributions, not knowing about the earlier…

Military service and Roth TSP


Q. I am 25 and now have the option to contribute to a Roth TSP. I have four years left on my military contract before I have the opportunity to get out. Seeing that my future with the military is somewhat questionable, would the Roth TSP still be a favorable option? A. Except for tax-free pay earned in a combat zone, I don’t see any reason to expect that contributions to the Roth TSP are somehow better than contributions to the traditional TSP. In fact, I recommend that you favor the traditional TSP over the Roth TSP unless your circumstances…

New Jersey TSP tax questions? Please resend


Q: I have tried to solicit your opinion several times concerning the taxation of Thrift Savings Plan distributions to individuals who had their contributions taxed going into TSP (because New Jersey doesn’t recognize the tax-exempt status of TSP), but have never received any response. A: I apologize if you did not receive the response you were looking for. I was not aware that I had overlooked any questions. Please submit your question again and I will respond promptly.