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Thrift Savings Plan (TSP): Federal Employee Retirement Taxes (2025 IRS Guide)

This guide covers “Thrift Savings Plan (TSP)” within federal employee retirement taxes. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 721 (2025), Tax Guide to U.S. Civil Service Retirement Benefits, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

This part of the publication is for retirees who retired on nondisability retirement.

.If you retired on disability before you reached your minimum retirement age, see Rules for Disability Retirement and Credit for the Elderly or the Disabled under Part III, later. However, on the day after you reach your minimum retirement age, use the rules in this section to report your disability retirement and begin recovering your cost..

Thrift Savings Plan (TSP)

Generally, all of the money in your TSP account is taxed as ordinary income when you receive it. (However, see Roth TSP balance and Uniformed services TSP accounts next.) This is because neither the contributions to your traditional TSP balance nor its earnings have been included previously in your taxable income. The way that you withdraw your account balance determines when you must pay the tax.

Roth TSP balance.

The TSP also offers a Roth TSP option, which allows you to make after-tax contributions into your TSP account. This means Roth TSP contributions are included in your income. The contribution limits are the same as the traditional TSP. You can elect to have part or all of your TSP contributions designated as a Roth TSP. Agency contributions will be part of your traditional TSP balance. Also, you can’t roll over any portion of your traditional TSP into your Roth TSP.

Qualified distributions from your Roth TSP aren’t included in income. This applies to both your contributions to the account and income earned on that account. A qualified distribution is generally a distribution that is:

  • Made after a 5-tax-year period of participation; and

  • Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled.

For more information, go to the TSP website, TSP.gov, or the TSP Service Office. See Pub. 575 for more information about designated Roth accounts.

Uniformed services TSP accounts.

If you have a uniformed services TSP account that includes contributions from combat pay, the distributions attributable to those contributions are tax exempt. However, any earnings on those contributions to a traditional TSP balance are subject to tax when they are distributed. See Roth TSP balance, earlier, to get more information about Roth contributions. The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. You can get more information from the TSP website, TSP.gov, or the TSP Service Office.

Direct rollover by the TSP.

If you ask the TSP to transfer any part of the money in your account, from traditional contributions and earnings, to a traditional IRA or other qualified retirement plan, the tax on that part is deferred until you receive payments from the traditional IRA or other plan. However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and earnings. Also, see Rollover Rules, later.

Direct rollover by the TSP to a Roth IRA.

If you ask the TSP to transfer any part of the money in your account, from traditional contributions and earnings, to a Roth IRA, the amount transferred will be taxed in the current year. However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and earnings. Also, see Rollovers to Roth IRAs, later, for more information.

Note:

A direct rollover of your Roth contributions and earnings in your TSP account if certain conditions are met (see Roth TSP balance, earlier) to a Roth 401(k), Roth 403(b), Roth 457(b), or Roth IRA aren’t subject to tax when they are transferred or when you receive payments from those accounts at a later date. This is because you already paid tax on those contributions. You can’t roll over Roth contributions and earnings in your TSP account to a traditional IRA or traditional SIMPLE IRA.

TSP annuity.

If you ask the TSP to buy an annuity with the money in your account from traditional contributions and earnings, the annuity payments are taxed when you receive them. The payments aren’t subject to the 10% additional tax on early distributions, even if you are under age 55 when they begin. However, there is no tax on the annuity payments if the annuity is purchased using the money in your account from Roth contributions and earnings if certain conditions are met. See Roth TSP balance, earlier. This is because you already paid tax on those contributions.

Cash withdrawals.

If you withdraw any of the money in your TSP account from traditional contributions and earnings, it is generally taxed as ordinary income when you receive it unless you roll it over into a traditional IRA or other qualified plan. (See Rollover Rules, later.) If you receive your entire TSP account balance in a single tax year, you may be able to use the 10-year tax option to figure your tax if the plan participant was born before January 2, 1936. See Lump-Sum Distributions in Pub. 575 for details. However, there is no tax if you withdraw money in your TSP account from Roth contributions and earnings if certain conditions are met. See Roth TSP balance, earlier.

If you receive a single payment or you choose to receive your account balance in monthly payments over a period of less than 10 years, the TSP must generally withhold 20% for federal income tax. If you choose to receive your account balance in monthly payments over a period of 10 or more years or a period based on your life expectancy, withholding is determined using the instructions and tables provided in Pub. 15-T, based on information you provide on Form W-4P. If you don’t submit Form W-4P then for a payee who received a first periodic payment in 2025, the TSP must withhold as if you were a single filer who made no entries in Step 2, Step 3, and Step 4 of Form W-4P. For the default 2025 withholding for a payee who first received a periodic payment before 2025, see Payee fails to furnish Form W-4P or provides an incorrect SSN on Form W-4P in Pub. 15-T. See also Withholding from Thrift Savings Plan payments, earlier, under Tax Withholding and Estimated Tax in Part I. However, there is no withholding requirement for amounts withdrawn from your TSP account that is from Roth contributions and earnings if certain conditions are met. See Roth TSP balance, earlier, for a discussion of those conditions.

Tax on early distributions.

Any money included in gross income from your TSP account before you reach age 59½ may be subject to the 10% additional tax on early distributions. However, this additional tax doesn’t apply in certain situations, including any of the following.

  • You receive the distribution and separate from government service during or after the calendar year in which you reach age 55.

  • You are a qualified public safety employee before the earlier of age 50 or completing 25 years of service under the plan if you are a qualified public safety employee.

  • You receive a qualified disaster distribution. See Form 8915-F, Qualified Disaster Retirement Plan Distributions and Repayments, and its instructions.

  • You choose to receive your account balance in substantially equal payments (not less than yearly) based on your life expectancy.

  • You are totally and permanently disabled.

  • You receive amounts from your Roth contributions that either represent a return of your cost (after-tax money) or you receive a qualified distribution from your Roth IRA. See Roth TSP balance, earlier. The earnings may be subject to the 10% additional tax depending on whether you met certain conditions.

Note:

Changes to the initial distribution method or amount under the substantially equal payment exception may result in a recapture tax.

For more information and other exceptions to the 10% additional tax on early distributions, see Tax on Early Distributions in Pub. 575.

Outstanding loan.

If the TSP declares a distribution from your account because money you borrowed hasn't been repaid when you separate from government service, a plan loan offset will occur. A plan loan offset is the amount your account balance is reduced, or offset, to repay the loan from the plan (your unpaid loan balance and any unpaid interest). The distribution may also be subject to the 10% additional tax on early distributions. However, the tax will be deferred if you make a rollover contribution to a traditional IRA or other qualified plan equal to the declared distribution amount. See Rollover Rules, later.

If you withdraw any money from your TSP account in that same year, the TSP must withhold income tax of 20% of the total of the declared distribution and the amount withdrawn. However, no withholding is required for portions of the distribution that is from Roth contributions and earnings if certain conditions are met. See Roth TSP balance, earlier.

More information.

For more information about the TSP, see Summary of the Thrift Savings Plan. Also, see Tax Rules about TSP Payments and Distributions. These publications are available on the TSP website at TSP.gov/forms. You may also call the TSP at 1-877-968-3778. For participants who are deaf, hard of hearing, or have a speech disability, dial 711 from any telephone.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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