When you take out a loan from your 457(b) account, the amount of the loan is not taxable. Repayments of the loan are not deductible. Interest paid on the loan is not deductible as mortgage as the loan is secured by your 457(b) account, and not by your home.
You are not being taxed twice. You are taxed only on the distributions from your 457(b) account, not on a loan.
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