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22

If you expand to include all the inflows into and outflows from the 401(k) account, you will see that there is no double taxation: You contribute from your paycheck. The income is not taxed. You take a loan. The disbursement is not income and is not taxed. You earn income which is taxed. You use some of that income to pay back the loan. You take a ...


18

Consider that if you had simply left your 401k alone and taken a loan for the same amount from another source (say, a personal loan from a bank), you'd be paying with post-tax money, as well. With that in mind, ultimately, taking a loan from your 401k (versus from another source) doesn't impact your total tax liability. In that sense, there is no double ...


13

Imagine if you borrow $100,000 from your 401K and then just use that $100,000 to pay the loan back. You will never have paid any taxes on that $100,000 at any time. So point 1 is nonsense.


7

All of these answers are correct that the principal payments do not cause double taxation. However, they are incomplete because they do not include an example where you are paying back "interest" on your 401k loan. 401k loans most likely require the borrower to pay a low (currently ~4.5%) interest rate on their 401k loan. The interest portion of your ...


4

401K loans aren't double taxed, per se, because loans aren't. Loans are not income generally What they're overlooking is that when you take a loan, that's not income so you are not taxed on it. Wait, how does that work? How is it not income? It's cash in hand! Well, that's a "cash" way of thinking, and in big accounting, it works that way on the cash ...


4

Worst case they get 0 $ back, but that does not mean that they lost money since credit was created out of thin air so even if every credit defaults they still will not loose any money and anything they get back is pure profit. Obviously if a bank never lost money by not getting paid back they would make loans all day long, even ones they knew they would not ...


4

As you've described it, the money you repaid your mother in excess of the money she loaned you is neither a gift, nor a loan. It is interest income to her for the loan she gave you. Your mother needs to ask her accountant in India how to report the $13,500 in interest income you paid her. You don't have any tax consequences for paying that interest. If it ...


3

You asked, Is there such a thing as a truly preapproved credit card or loan? That is, are there banks that actually fully investigate potential borrowers, before any application has been completed, and send them truly guaranteed offers? No, there is no truly, completely, 100% "pre-approved loan." That concept just doesn't exist. The language of calling ...


3

TL;DR - "principal balance" is the loan amount without any added interest/fees and "outstanding balance" is the total amount of the loan including interest/fees (so they can be the same if there's no interest). Principal balance usually has to do with the original loan amount or the remaining principal after re-amortization. The outstanding balance usually ...


2

Short and sweet answer: The loan amount is not taxed twice, but the interest you pay is definitely double taxed! Unlike your 401K contributions, the interest you pay on the loan (even though it is going into your own 401K account) is from your "after tax" earnings. Now upon retirement you take money out of your 401k (which includes the interest you paid), ...


1

You will sometimes see two numbers when looking at a loan balance. One will represent the principal balance. This is how much of the loan remains. The other will be the outstanding or payoff balance as of this moment in time. Everyday after your most recent payment interest accrues. So if you make a payment on the 13th, and then you check on the 20th; ...


1

I have received literally hundreds of those "preapproved offers". I have never seen one that didn't require an application first. In the US, I believe there was problem in the 70s where some credit card companies were sending actual credit cards (including to someone's dog and several dead people). If memory serves, there was some federal laws passed to not ...


1

"Double taxation" generally refers to the same money being taxed twice. You are getting taxed twice, but you earned money twice as well. You earned the money you originally put into the 401(k), and you're taxed when you take that out. You earned the money you used to pay the loan back, and you are taxed on that when you earn it. Since money is fungible, I ...


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