401(k) loans are not necessarily double taxed according to financial experts, but taxes on these loans could be more than two times what a normal loan would be taxed. The reason for this is they are taxed during the loan payback and again during the distribution of the fund at retirement. Even without the large tax amounts, they are still seen as a bad financial decision by many professionals.

One reason 401(k) loans are not a good idea is because their loan interest is not tax deductible, unlike other loans. Along with this, the lender is required to lend to a borrower regardless of whether the participant is creditworthy, leading to many default cases. This makes many lenders less likely to supply 401(k) loans, thus raising their price. In addition to this, most loan participants end up reducing or stopping their contributions while paying back loans, which ends up losing employees company matching contributions. To find out more information about 401(k) loans, please take a look at the following blog.

https://401kspecialistmag.com/401k-loans-double-taxed/