No. of Recommendations: 1
Not sure why it doesn't "seem right", you borrowed the "before tax" money, why should the repayment also be tax exempt?

Now, on the bright side, you are probably paying yourself 4.5% - 5% interest on the loan, which you won't be taxed on.

Myself, hate my 401K choices, so I take a loan every 12 -14 months, pay off my loan with after tax money, in addition to adding tax deferred deductions. Pay myself the going interest rate on the loan, and deposit the loan into various ROTH investments (individual stocks and some T Rowe Price funds) which will be tax free. Also, money I add to ROTH accounts can be used for deductions on tax returns. To me, it works. You needed the cash, me I wanted to be in control of it.
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