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I took out a 401k loan 1.5 years back for a home down payment. The loan had a 36 month term, and I was making payments thro' payroll deductions from my employer. I recently quit that job, and I am self-employed now. I am leaving the 401k with the administrator and not rolling over into an IRA.

The 401k administrator allowed me to make monthly payments directly from my bank account at the same rate as my original payroll deduction. This way I am not defaulting on the loan. Are these payments tax-deductible?

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    Generally speaking, 401k loans need to be repaid "immediately" or within a short period (60 days?) upon termination of employment: else the outstanding balance is treated as a premature distribution. But, if the reason for the loan (down-payment for a home) affects this in some way and you are entitled to repay the loan via monthly payments from your bank account, why do you think that the payments should be tax-deductible?
    – Dilip Sarwate
    Apr 2, 2015 at 13:58
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    Is the OP wondering if the interest payments are tax-deductible, as if this were a mortgage payment? Clearly, the principal was already pre-tax income, and it wouldn't make sense for it to be deducted from income twice.
    – Rick Goldstein
    Apr 2, 2015 at 17:10
  • @RickGoldstein The OP is wondering if repayment of the principal after he left the company can be tax deductible because while on the company, 401(k) loan repayment of principal through payroll deductions are done pre-tax.
    – AxiomaticNexus
    Apr 2, 2015 at 18:54
  • @DilipSarwate Because 401(k) loan repayments through payroll deductions are done pre-tax. However, the fact that he was not asked to pay it all off at once after his employment termination is very strange. He probably lost the tax benefits when he left the company, but I suggest he ask the company managing his 401(k).
    – AxiomaticNexus
    Apr 2, 2015 at 18:58
  • @YasmaniLlanes: "401(k) loan repayment of principal through payroll deductions are done pre-tax" No, it is post-tax. In other words, the repayment amount does not reduce his taxable income. Think about it, he got the loan out into his pocket as post-tax money; obviously it can't be that he gets to pay it back with pre-tax money.
    – user102008
    Apr 3, 2015 at 2:58

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No, it's not; the same way that payments on other regular loans that you get from people are not tax-deductible.

If you think about it, you do not pay tax on the borrowed money when you got the money out. So why would you be able to "deduct" it when you put it back in?

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