Yes, but not all of it. You paid tax on the money you put into the thrift savings plan (TSP). When the money is distributed New Jersey (NJ) will not that portion. You will pay tax on any earnings distributed from the account. TurboTax will walk you through this.
- TSP Withdrawal and the NJ Worksheet C: When you withdraw funds from the TSP, such as required minimum distributions, it is important that in preparing your New Jersey Income Tax return, you complete Worksheet C to calculate taxable and excludable portions of the withdrawal. This is necessary because the amounts you contributed were included in your New Jersey taxable income for the year you made the contribution. When you withdraw funds a portion of the withdrawal includes a return of your contribution, which, as noted above has already been taxed in the year you made the contribution and should not be taxed again. Worksheet C addresses this issue by calculating taxable and excludable portions of your TSP Withdrawal.
- NJ-1040 Instructions (See page 14)
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