Resources

Forms:

U = Uniformed Services

Are You Earning Tax-Exempt Pay?
Roth contributions are ideal for uniformed service members earning tax-exempt pay in a combat zone. You are not paying tax on your contributions, and provided you meet the IRS rules, you won’t have to pay tax on your earnings either. Also, you’re allowed to make Roth catch-up contributions from tax-exempt pay.
Catch-up Contributions
Catch-up contributions can be traditional or Roth. If you are a uniformed services member, you cannot make traditional catch-up contributions from tax-exempt pay but Roth catch-up contributions from tax-exempt pay are allowed.

When you withdraw money from the TSP,

  • You will owe taxes on any traditional contributions (except those that are tax-exempt) and their earnings.

    You can continue to defer taxes by transferring or rolling over your payment to a traditional IRA or an eligible employer plan. You can also transfer or roll over your traditional funds to a Roth IRA, but you will have to pay taxes on the full amount in the year of the transfer.
  • You will not owe taxes on your Roth contributions—you have already paid them.  Roth earnings are not taxed if they are “qualified”.  Roth earnings are qualified (i.e., paid-tax free) if 5 years have passed since January 1 of the calendar year in which you made your first Roth contribution and you have reached age 59 ½, have a permanent disability, or have died.

    If your Roth earnings are not qualified, you will owe taxes on them. You can defer the taxes by transferring your Roth payment to a Roth IRA or Roth account maintained by an eligible employer plan.