Buying back service credit for Teacher Retirement deductible?

[mikeburg]

I have a Texas teacher who apparently has not contributed enough to her Teacher Retirement to be able to retire.

She has an Agreement for Purchase of Service Contract from the TRS to purchase back service credit for a little over $19,000.

The TRS is an exempt organization under Section 501(a).

During 2013 she paid $4,000 cash to the above contract.

(1) Are her payments to purchase the back credits deductible in any way?
(2) If so, where?
(3) If not, will she have a basis to deduct as she is drawing her teacher retirement?

Thank you for any & all information. mikeburg

[joanmcq]

Basis as she would have with any post tax contributions to a defined benefit pension. When she starts to draw, there should be a difference between gross distribution & taxable distribution.

[ATSMAN]

Joanmcq is correct. The contribution to buy back years of service for pension benefit adds to the basis and please make sure they keep track of that. I had one teacher whose 1099-R was incorrect upon distribution because box 1 and 2 were the same. It should have been taxable amount not determined and then you can use the various calculation to recover the basis.

[mikeburg]

Thank you everyone!

I appreciate the info you provided. That helps me a lot to know when I am on tract as the taxpayers get wrong ideas.

mikeburg