TSP loan repayment and taxes


Q. I borrowed $50,000 from my Thrift Savings Plan two years ago and have been paying it back biweekly. Will I be taxed on the money I borrowed? If so, when and how much?

Also, I’m looking at retiring in three years. I will be 59 and have 33 years on the job. How much risk should I take in my TSP account?

A. A loan is not taxable unless you fail to repay it on time. The amount of risk you take with your TSP assets should be matched to your specific financial goals and life circumstances. The right risk level can’t possibly be determined using only your age and years of service. In fact, your years of service have nothing directly to do with it.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

1 Comment

  1. The principle you owe on the loan at the time of retirement will be taxed at your marginal rate as ordinary income.

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