Thread: TSP During Deployment

This reply is pretty late, but if you're still out there...

First, each W-2 that you get is separate. You can't have a negative income for the year to offset your wife's income.

Second, taxes are handled on a yearly basis. It doesn't matter what months the income happens in, so there's no worries (from a tax viewpoint) if she gets a paycheck in the summer months.

Third, your income while deployed is already non-taxable. You don't get a double whammy by putting it into the tax deductible TSP and subtract from zero. Whatever you put into the TSP while deployed is recorded as being a tax-free contribution. What that means is that if you put in $10k while deployed, you can take out $10k tax free after you retire. All the earnings on that money will still be taxed upon withdrawl, though.

Fourth, there's not usually any really good reason to try to press your taxable income down super low for a particular tax year. Generally, you're better off having an even income year-to-year, rather than low one year and high the next. The year you have the higher income, you get taxed at a higher rate, so you end up paying more taxes.

A strategy might be to max out your roth ira, and then put the rest of the money you can save in the SDP. If you max SDP out, then put more in some short term mutual funds. Next year when you're back, max out your TSP with the money that you saved this year. I'm crossing my fingers that TSP will finally bring the Roth option to us in 2012. Depositing into Roth TSP is a better deal that contributing tax-free to a tax-deferred account. Unfortunately, we don't have that option quite yet.