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Author: foo1bar Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127811  
Subject: Re: Downpayment Sources Date: 5/10/2013 5:39 PM
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That said, remember that the "earnings" you're paying yourself in the 401(k) loan repayment interest will be taxed twice.

For those reading this, note that he specifically said earnings - i.e. the interest on the money.

I have seen people say that they will wind up paying taxes twice on the full amount borrowed - and that is not true.
But it is true that you're basically paying twice on the interest portion.
But that IMO is a minor consideration, and the "you're paying taxes twice" is a phrase that is more designed for an emotional impact, rather than logic.

Personally, I look at it as two separate sides.
1> I'm making an "investment" in my 401k into a "bond" that pays X% interest. And that bond is a "low risk" bond (because I believe I'm going to make the payments.
2> I'm getting a loan and paying X% interest on that loan. And the loan must be repaid almost immediately if I leave the job (either voluntarily leave or fired)

If I'm happy with both of those (or think the downside of one is more than compensated by the upside of the other), then it's a reasonable choice.
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