Tax Treatment of Your Contributions:Traditional and Roth Contributions

You can choose between two tax treatments for your TSP contributions:

  • Traditional (pre-tax)-You defer paying taxes on your contributions and their earnings until you withdraw them. If you are a uniformed services member making tax-exempt contributions, your contributions will be tax-free at withdrawal but your earnings will be subject to tax.
  • Roth (after-tax)-You pay taxes on your contributions as you make them (unless you are making tax-exempt contributions), and your earnings are tax-free at withdrawal as long as you meet certain IRS requirements.

If you want to make contributions, you must submit a contribution election to tell your agency what portion of your pay you want to contribute and how you want to designate them between traditional and Roth. You cannot convert any portion of your existing traditional TSP balance to a Roth balance.

You can make both traditional and Roth contributions if you want. You can contribute in any percentages or amounts you choose subject to IRC limits and change your election at any time.

If you are FERS or BRS, your Agency/Service Matching Contributions are based on the total amount of money (traditional and Roth) that you contribute each pay period. All agency/service contributions are deposited into your traditional balance.Roth TSP is similar to a Roth 401(k), not a Roth IRA. There are no income limits for Roth TSP contributions.

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