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Paging Poodlebrain or qualified advice (401k loan repayment)
Posted on 3/6/15 at 7:04 pm
Posted on 3/6/15 at 7:04 pm
If someone owned their own business and contributed into a traditional 401k to themselves as an employee and matched it as an employer. If they took out a loan against the 401k, since this money is pre-taxed would they have to pay taxes on repayment of the loan? Or would they just pay it back pre-tax since it eventually be taxed upon distribution in retirement?
3
Posted on 3/7/15 at 12:25 am to TigerSaint1
Not an expert, but I don't think you would pay taxes on repayment of the loan. You will incur a fee for service (menial) and should you for some reason leave/shut down the business; you must repay remaining balance. Other than that if say you might be good from a tax avoidance perspective. Disclaimer- I'm not a tax accountant.
Posted on 3/7/15 at 8:52 am to TigerSaint1
The loan proceeds are not taxed. The repayments are made with after-tax dollars.
Posted on 3/7/15 at 9:15 am to LSUFanHouston
quote:Correct, and the interest is not deductible since you are paying it to yourself. Since you repay the loan with after-tax dollars, you pay tax on the interest you pay in the year of repayment. You pay income tax on that interest again when it is distributed to you, hopefully, after you turn 59-1/2. So the true interest rate on a loan from your 401(k) is actually higher than the stated rate.
The loan proceeds are not taxed. The repayments are made with after-tax dollars.
Posted on 3/8/15 at 4:33 pm to Poodlebrain
That makes sense. Thanks
Posted on 3/8/15 at 4:34 pm to TigerSaint1
quote:
Paging Poodlebrain
Is there another poster that brings higher quality posts than this guy?
Posted on 3/8/15 at 5:55 pm to I Love Bama
He's up there with Circus Child IMO
Posted on 3/8/15 at 8:06 pm to I Love Bama
quote:
Paging Poodlebrain or qualified advice (401k loan repayment) quote: Paging Poodlebrain Is there another poster that brings higher quality posts than this guy?
No, the guy is pretty top notch. Especially sice he typically gets paid for his services but he's willing to share his knowledge with us.
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