TSP Tax Questions 101

[Aviator_Guy]

I have a few questions on withdrawing TSP account funds in monthly equal payments. I understand you can adjust this amount annually up or down. My question is, if you live in a state that doesn’t tax retirement income annuities, does the state try to re-coup their taxes on the TSP retirement withdrawals?

I know some states, such as Arizona don’t tax retirement annuities. But, I was wondering if those states consider this a retirement payment? If the state considers this taxable income, we would be hit with both state and federal taxes. In addition to the state and federal income taxes, would they withdraw social security taxes on my TSP payments until I reach age 62?

Being in the FERS vice CSRS, my TSP is beginning to dwarf my projected “high three” fixed annuity. I will have 34 years of fed service when I reach my minimum retirement age of 56. That date is still another 6 years away, but I wanted to get a better feel for how they handle these tax questions on our TSP savings. If you’re a retiree who has addressed these questions or if you know of a good reference, I appreciate your help, Thanks!

 

[Spaf]

Aviator Guy,
I would defer your question to a reputable accountant. On a personal issue this is something that states will differ and your allocations will need professional advice.
I retired about 9 months ago. 2006 was ok, but 2007 is unclear!
Thats about as far as I Know!
Oklahoma!
Spaf

 

[GGal]

"In addition to the state and federal income taxes, would they withdraw social security taxes on my TSP payments until I reach age 62?"

Withdrawals from TSP are not wages subject to social security tax.

GA

 

[Spaf]

GG,
The only thing being withdrawn is federal taxes from the civil service annuity.
This is something your accountant has to advise on!
I gave up on taxes years ago!
This year I got back a few 100 after paying my accoutant!
Not a big worry!
Will see what 2007 has to offer!
??
Spaf

 

[GGal]

Spaf, I was merely responding to his question where he asked if social security tax would be due on his TSP withdrawals.

The answer is NO. Withdrawals from TSP are not subject to social security tax.

I don't need to ask my accountant, since I am a licensed CPA.

And I stand by my answer. TSP withdrawals are not subject to social security tax. Period, the end.

I didn't attempt to answer his other questions, since I'm not familar with Arizona state income tax laws.

GA

 

[Aviator_Guy]

Thanks for the info! Well, it looks like I don’t need to worry about the feds taxing SSA from my TSP withdrawals, that’s cool. So it looks like the Fed will only take the mandatory 20 percent off of my withdrawals in retirement and I can deal with that. The jury is still out on the state Taxes. And I agree, each state is unique!

Spaf, I was merely responding to his question where he asked if social security tax would be due on his TSP withdrawals.

The answer is NO. Withdrawals from TSP are not subject to social security tax.

I don't need to ask my accountant, since I am a licensed CPA.

And I stand by my answer. TSP withdrawals are not subject to social security tax. Period, the end.

I didn't attempt to answer his other questions, since I'm not familar with Arizona state income tax laws.

GA

 

[Birchtree]

Once you retire everything you do will impact your AGI (adjusted gross income). Money taken out of a Roth IRA is tax free and does not contribute to your AGI. The problem becomes how to get money into a Roth. A monthly withdrawl from TSP is ideal providing you have a minimal AGI. Build a savings account and live off that for a year or two and you'll pay no taxes on your transfers to the Roth IRA. Prolong SSA and your annuity until your are ready. It's all in the planning and don't forget the Mrs.

 

[Ed]

I have a few questions on withdrawing TSP account funds in monthly equal payments. I understand you can adjust this amount annually up or down. My question is, if you live in a state that doesn’t tax retirement income annuities, does the state try to re-coup their taxes on the TSP retirement withdrawals?

I know some states, such as Arizona don’t tax retirement annuities. But, I was wondering if those states consider this a retirement payment? If the state considers this taxable income, we would be hit with both state and federal taxes. In addition to the state and federal income taxes, would they withdraw social security taxes on my TSP payments until I reach age 62?

Being in the FERS vice CSRS, my TSP is beginning to dwarf my projected “high three” fixed annuity. I will have 34 years of fed service when I reach my minimum retirement age of 56. That date is still another 6 years away, but I wanted to get a better feel for how they handle these tax questions on our TSP savings. If you’re a retiree who has addressed these questions or if you know of a good reference, I appreciate your help, Thanks!

I was told by an accountant that NYS does not tax defined benefit plans (CSRS and FERS) and taxes defined contribution plans (TSP). You should check with the state income tax department to be sure.

Ed

 

[pcsgrp]

Living in NJ and working in NY is a situation you don't want to be in. New Jersey specifically taxes you contributions to the TSP as income and withdraws become part of you income. The get you going in and out.

 

[tsptalk]

Living in NJ and working in NY is a situation you don't want to be in. New Jersey specifically taxes you contributions to the TSP as income and withdraws become part of you income. The get you going in and out.

Welcome pcsgrp! Wow - Is that true? How does NJ determine your AGI? It doesn't use the federal AGI as a starting point?