dmertz
Level 15

Retirement tax questions

Unless you default on the loan and the outstanding loan balance becomes taxable, you are ALWAYS repaying the loan principle with the pre-tax money that you were loaned.  It doesn't matter how you shuffle the loan dollars with other dollars because money is fungible.

The ONLY money that is taxed twice is the INTEREST that you pay to your 401(k) on the loan.  You pay the interest with after-tax money and it becomes pre-tax money when paid to the 401(k).