@JoeVade wrote:
Regarding your second paragraph, if that's true then what about my Roth contributions to the same 401k account? Or after-tax contributions for the "mega-backdoor" strategy? I know that those can be rolled into a Roth IRA without paying any taxes. It feels like they would need to keep track of the different proportions within the same account or else these common popular strategies wouldn't be possible. So given that, what is it about loan repayments that causes it to get a different treatment than other after-tax amounts, if that is the case?
A Roth-option account inside a 401(k) is different. As is a traditional IRA, where you can keep track of non-deductible basis using form 8606. Each type of account is covered by different laws and regulations even though they have a similar overall purpose. You never have a traceable after-tax basis in a pre-tax 401(k), even if you deposit after-tax money.
If you took your loan from the Roth-option account inside your 401(k), then your interest payments would add to the balance but would not be taxable on withdrawal.
