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I have a question about service credit purchase. when I

Customer Question
I have a question about...
I have a question about service credit purchase.
JA: The expert will know how to help. Please tell me more, so we can help you best.
Customer: when I retired I borrowed money to purchase 2.8 years of service credit and started repayment of the account with taxed dollars. Is this repayment a deductable expense.
JA: Is there anything else the expert should be aware of?
Customer: not sure
Submitted: 3 months ago.Category: Tax
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Answered in 14 minutes by:
7/26/2017
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,858
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi My name's Lane.

...

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents since 1986.

Bear with me a moment and I’ll provide my initial response, and then we can go from there if you have further questions on this.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago

I'm so sorry, no. But there IS a logic here, that I think you'll understand.

...

Although there is no deduction for purchasing the buyback service credit in the year that you pay for them, when you retire, you will not have to pay income tax on the portion of your retirement pay that represents the amount you paid in, because that income has already been taxed.

...

The 1099-R you get from the pension will show a portion of your payments as a return of after tax dollars (will be the difference between box 1, "Gross distribution," and box 2a, "Taxable amount."

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

I hope that you’ll rate me based on my accuracy and thoroughness, rather than any good news/bad news content.

That’s the only way JustAnswer.com will compensate me for the work here.

Thanks,

Lane

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,858
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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