Your 2025 TSP Tax Prep Checklist (Powered by the FINISH Line™ Process)
Preparing your TSP for retirement is more than choosing funds and hoping for the best. With tax brackets set to change after 2025 and major TSP rule updates coming in 2026, the next year may be one of the most important windows federal employees have ever had for tax planning.
This is the same checklist we use during our FINISH Line™ Tax Review sessions — a simple, powerful way to prepare for retirement, reduce tax exposure, and avoid costly surprises.
You can walk through this list yourself — or have our team review it with you during a Free 2026 Tax Readiness Checkup.
FINISH Line™ Tax Prep Snapshot
Before you dive into the checklist, here are the five areas we focus on with federal employees during a FINISH Line™ Tax Review:
| Checklist Area | What You’re Checking |
|---|---|
| Traditional vs Roth Mix | How much of your TSP will be taxed later — and whether your current balance exposes you to higher future brackets. |
| 2026 Tax Exposure | How your pension, TSP, and Social Security stack together under the post-2025 brackets. |
| Low-Income Windows | Where you may have room for Roth conversions or strategic withdrawals at lower rates. |
| 2026 TSP Rule Changes | How in-plan Roth conversions and Roth-only catch-ups may reshape your tax picture. |
| Pension & Social Security Timing | How the order you turn on income affects taxes, IRMAA, and TSP withdrawals. |
Start Your FINISH Line™ Tax Review
Get a personalized walkthrough of your TSP tax exposure and retirement income plan using the same checklist our team uses with federal employees every day.
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Review Your Traditional vs Roth TSP Mix
Your traditional vs Roth split determines how much of your TSP becomes taxable income later. And for most federal employees, that split is dangerously out of balance.
What to Review
- How much of your TSP is pre-tax (traditional)?
- Will you meet Roth qualification rules by retirement?
- Will RMDs at age 73 push your taxable income up?
- Will your mix expose you to higher future tax brackets?
Why This Matters
If taxes rise in 2026 — and your TSP is mostly traditional — your withdrawals could cost more than you expect.
Estimate Your 2026 Tax Exposure
Your TSP doesn’t exist in a vacuum.
It stacks with your:
- Pension
- Social Security
- RMDs
- Part-time work (optional)
Even without the 2026 tax reset, retirees often underestimate how fast their taxable income grows.
Quick Self-Check
- Compare today’s brackets to the projected 2026 reset.
- Review your anticipated yearly TSP withdrawals.
- Calculate combined pension + TSP + Social Security income.
- Review expected withholding (mandatory 20% on most cash withdrawals).
If these numbers seem unclear — you’re not alone. Most retirees don’t realize how this adds up until it’s too late.
Want to Know Your 2026 Tax Exposure?
Get a personalized snapshot of how your pension, TSP, and Social Security stack together under the post-2025 tax brackets — so you can see where the pressure points are before they become problems.
We’ll walk through this same checklist with you using the FINISH Line™ Process and map out your next best steps.
👉 Start Your Free 2026 Tax Readiness Checkup →Takes about 30–45 minutes. No cost. No pressure.
Identify Your Retirement “Low-Income Windows”
These windows — often unnoticed — are where federal employees can reduce the most taxes.
Examples
- Between retirement and starting Social Security
- Before RMDs begin at age 73
- Years where partial work income slows
- Years you intentionally keep income lower
Why This Window Matters
These periods allow:
- Roth conversions at lower rates
- Strategic partial withdrawals
- RMD reduction strategies
- Social Security tax planning
- Bracket control before 2026 increases
Prepare for the 2026 TSP Rule Changes
Two major updates are coming:
A) Roth In-Plan Conversions (January 2026)
You’ll be able to convert traditional → Roth inside TSP.
But remember:
- Converted amount = taxable income
- Taxes must be paid from outside funds
- Roth TSP has no RMDs later
B) Roth-Only Catch-Up Contributions
High earners (based on Medicare wages) will have age-50+ catch-ups automatically directed to Roth.
What This Means
2025 may be the last year to position your TSP before these changes permanently alter your retirement tax mix.
Check Your Pension & Social Security Timing
The order in which you turn on income sources shapes:
- Your tax bracket
- Social Security taxation
- Medicare IRMAA brackets
- TSP withdrawal strategy
- Roth conversion timing
- Your overall financial stability
One bad timing decision can cost federal retirees thousands.
Frequently Asked TSP Tax Questions
Do I have to report TSP withdrawals on my taxes?
Yes — traditional TSP withdrawals are fully taxable as ordinary income. Roth TSP can be tax-free if qualification rules are met.
Why is 20% withheld from TSP withdrawals?
The IRS requires mandatory 20% federal withholding on most withdrawals paid directly to you. This is not the final tax amount — just a prepayment.
Are TSP withdrawals taxed as capital gains?
No. TSP withdrawals are taxed as ordinary income, not capital gains, regardless of investment performance.
Can I roll over my TSP without paying taxes?
Yes — direct rollovers remain tax-deferred. Taxes only apply when money is paid to you directly.
Are early TSP withdrawals penalized?
Typically yes — unless you qualify for an exception like the age-55 rule.
Take the Next Step — Get Your FINISH Line™ Tax Readiness Checkup
You’ve now seen the checklist. But each step depends on your retirement date, income mix, agency service, TSP allocation, and upcoming rule changes.
That’s where the FINISH Line™ Process comes in.
During your 2026 Tax Readiness Checkup, we’ll help you:
- Review your TSP tax exposure
- Map your tax brackets through retirement
- Identify your Roth conversion window
- Sequence your income for lower taxes
- Preview your RMD burden at age 73
- Align everything into a clear, simple plan
Fast. No cost. No pressure.