I know that my Federal pension is not taxable in North Carolina. Are withdrawals from my Federal Thrift Savings Plan also tax free? If so, what about withdrawals from a rollover IRA account, when the source of those funds are from the Federal Thrift Savings account?
1) First A TSP-to-IRA rollover is not taxable on the Federal tax return, nor on the NC tax return....it's a rollover.
2) A TSP-to-IRA rollover is not taxed (#1)....then a distribution from the IRA? The IRA distribution is treated as a "Private" distribution, and is only eligible for the $2000 pension deduction for 2013. The rest of it is taxed by NC.
Why? the TSP-to-IRA rollover loses whatever Bailey Settlement eligibility it "might" have been vested in if it had remained in the TSP. See Item #5, page 29 of:
3) A TSP plan distribution to cash "might" be eligible for the Bailey Settlement exemption.
3a) IF you started your TSP contributions After 12 Aug 1989...then non of it is Bailey Settlement eligible, and all $ are treated as "private"
3b) IF you started your TSP contributions before 12 Aug 1989...then all your contributions and earnings are Bailey Settlement eligible,
BUT..the "employer" contributions may not be...depending on when those started. Read all of #4 on page 28 of:
the calculations there can get messy if your Employer was not making contributions soon enough to be Bailey Settlement eligible..
, Enrolled AgentTurboTax TaxPro
Thanks for your question about retirement income in North Carolina.
According to the 2013 North Carolina Individual Income Tax Instructions for D-400, distributions from both your Thrift Savings Plan and your IRA are eligible for a deduction on your North Carolina return. The deduction is limited to $4,000 per taxpayer.
I hope you find this answer helpful. If you have additional questions or comments regarding this issue, please feel free to reply to this post for further clarification.
Thanks for trusting TurboTax with your tax preparation!
I believe the rules regarding the distribution from an IRA which was the result of a rollover from the Thrift Savings Plan has been revised. The revised decision makes the distribution not taxable. Caveat being if you were eligible under the Bailey's exemption to begin with. I have been trying to find this ruling which I read in one of the tax sites on line but have not been able to find it.
It gave instructions regarding filing amended returns to recover taxes paid on prior year distributions that had been tax but only for those open years, 2010, 11 and 12.
Can any one else confirm this?
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