Guest lhinson Posted January 15, 2003 Posted January 15, 2003 Are participant loan payments pre-tax or after tax? This client has loans repaid through payroll deduction, and I'm not sure of the answer. It would seem that they should be pre-tax, since the money that was lent was pre-tax, but if loan repayments are not made through payroll deduction (the participant sends a check) then isn't that money after tax money? :confused:
Appleby Posted January 15, 2003 Posted January 15, 2003 Loan repayments do not reduce taxable compensation- they are made with post tax assets. Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com
E as in ERISA Posted January 15, 2003 Posted January 15, 2003 Loans repayments are not contributions. They are a change in investments. When the participant takes out the loan, the money is taken out of a mutual fund or something and "invested" in a loan from the participant; and as the participant repays it the loan investment is reduced and it is re-invested in a mutual fund or something. Thus, while contributions may be pre-tax, loan repayments are not.
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