Using saved leave to pay TSP loan off at retirement


I am retiring and have an outstanding TSP loan with about $15K left on it. We want to use our accrued leave money to pay that off. What is the best way to accomplish that so we don’t pay taxes on that money 2 times? if we wait for the check (which has taxes withheld) then write a check to TSP, won’t we get taxed a second time when we eventually withdraw that money?

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blank Posted by (Questions: 1, Answers: 1)
Asked on October 6, 2020 8:35 pm
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You will not be double taxed. TSP loan repayments are made from after-tax, not pre-tax, dollars; take a look at the leave and earnings statements that show your loan repayments and you will see that this is the case.
The loan itself gives you the use of tax-free money. Any method of repayment will come from after tax monies. For example, if, rather than repay the loan when you retire, you choose to let it go into default. The outstanding balance would be treated as a taxable distribution and would be reported to the IRS as such.
See this information from the TSP website

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blank Posted by (Questions: 0, Answers: 82)
Answered on October 7, 2020 2:42 pm
Thanks for your response. I appreciate your help. Totally understand now.
( at October 8, 2020 3:10 pm)