Hi BrianDNY,
No the loan and the interest will not be taxed. The loan allows you to avoid paying the taxes and penalties that come with taking an early withdrawal. Additionally, the interest you pay on a 401(k) loan is added to your own retirement account balance. even though it is on an ater-tax basis.
For more information on loans from retiurement accounts check these links:
IRS: FAQ's Regarding Retirement Account Loans
Tax Benefits of your 401K
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Terri Lynn
