Hi,
I have read several questions and answers from this forum about the tax treatment of 401k loan repayment. Overall, the opinion seems to be that the loan repayment is not taxed. But I am confused about this opinion. Because I am repaying the loan (principal + interest) using after-tax money, it is being taxed, right?
Just to make things concrete: let's say my 401k loan amount is 9000 and interest is 1000, and I am paying it in 1 year, so essentially I am paying 10000 in 1 year (833.33 per month). I see that the plan administrator is deducting 833.33 from my bank account (after-tax money). So in a sense, I am paying tax on 10000, right?
Can someone explain please? Thanks in advance.
