When you take a loan out from a 401(k) plan, the money you take out is tax-exempt as long as you pay it back on time. As you make payments, the interest you pay is paid to your 401(k) account. Your payments are not deducted on your tax return nor the loan.
Refer to the TurboTax article What happens if I have a 401(k) loan but later lose or quit my job? if you stop working at your job.
Refer to the IRS Topic Considering a loan from your 401(k) plan? for more information.
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