Updated October 7, 2026. Quick answer: Sometimes. Oregon’s Publication OR-17 says that once you are a retiree, “withdrawals from federal TSP accounts are eligible for the subtraction”, and the subtraction depends on how much of your federal service came before October 1, 1991: with none, you “no months of service or points earned before October 1, 1991” can subtract nothing.
Oregon TSP withdrawal tax treatment at a glance
| Item | What the documents say |
|---|---|
| TSP withdrawals | A retiree’s TSP withdrawals qualify for the federal pension subtraction, in proportion to service before October 1, 1991 |
| FERS annuity | The documents treat benefits paid to a federal retiree under one federal pension subtraction and do not name FERS separately |
| Rate or limit printed | 100 percent if all service was before October 1, 1991; none if none was |
| Where it is reported | Schedule OR-ASC (OR-ASC-NP if part-year), subtraction code 307 |
| Source | Oregon Department of Revenue; Oregon Legislative Counsel (oregonlegislature.gov) |
What the Oregon documents say
OR-17 explains the federal pension subtraction. If all of your months of federal service occurred or points were earned before October 1, 1991, you “subtract 100 percent of the taxable federal pension income” you reported on your federal return. If you have “no months of service or points earned before October 1, 1991”, you cannot subtract any federal pension. If your service spans both periods, you subtract the share earned before that date.
On the TSP the publication is direct: once a taxpayer is a retiree, “withdrawals from federal TSP accounts are eligible for the subtraction”, and withdrawals before retirement are not eligible. It adds that moving TSP money to another type of account loses the character, so future withdrawals from that account are no longer a federal pension. The code is “Subtraction code 307” on the Schedule OR-ASC, and the statute is “ORS 316.680(1)(e)”.
A worked example at $30,000 of withdrawals
An illustration, not a return: an Oregon resident who has retired takes $30,000 from the TSP in 2026. If every month of federal service was before October 1, 1991, the instructions’ rule subtracts 100 percent, so $0 of it is taxed by Oregon. If none of it was, nothing is subtractable and the whole amount is taxable. Anything between is a proportion. The publication prints Oregon’s graduated rate schedule, from 4.75% on the first bracket to 9.9% over $125,000, but the tax on a withdrawal depends on the rest of the return, so no tax figure is computed.
If you moved to Oregon or left it
The rules above are Oregon’s own, for a resident. Federal law limits what a state you have left may do: “No State may impose an income tax on any retirement income” of someone who is not a resident or domiciliary of that state, as 4 U.S.C. 114(a) puts it. The statute defines retirement income by reference to plans described in the Internal Revenue Code; this page does not decide whether a particular TSP payment meets that definition. If you moved during the year, check each state’s page and return. See CMG’s TSP withdrawal options and FERS, TSP and Social Security sequencing pages for the federal side.
What changes in 2026
The documents read for Oregon announce no change for 2026 that is specific to TSP withdrawals. The instructions read are for tax year 2025, the newest archived; check the state agency for the 2026 forms when they are published.
What the documents do not say
- The subtraction formula for mixed service (months or points before the date divided by total) is in the publication and is not reproduced as arithmetic here. The rate schedule is printed in the publication and is not reproduced here.
Common mistakes
- Taking the subtraction for a withdrawal made before retirement; the publication says withdrawals before retirement are not eligible.
- Rolling TSP money into an IRA and expecting later withdrawals to qualify; the publication says the account loses its character as a federal pension.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the withdrawal.
Related: TSP withdrawal options, state tax on TSP withdrawals, Oregon retirement taxes, how Oregon taxes pensions, and how Oregon taxes 401(k) and IRA withdrawals.
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Answer againSources
- 2025 Publication OR-17, Individual Income Tax Guide (Rev. 01-29-26): https://www.oregon.gov/dor/forms/FormsPubs/publication-or-17_101-431_2025.pdf
- Oregon Revised Statutes Chapter 316, Personal Income Tax: https://www.oregonlegislature.gov/bills_laws/ors/ors316.html
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.