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June 6, 2019
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Reporting 401k loan as income and wonder how the tax penalty is calculated? is it from the original loan balance or what is owed now?

  • June 6, 2019
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Best answer by dmertz

The early-distribution penalty is 10% of the taxable amount of the deemed distribution or offset distribution.  The deemed distribution or offset distribution is the outstanding balance on the loan, not the original loan amount.

1 reply

dmertzAnswer
Employee
June 6, 2019

The early-distribution penalty is 10% of the taxable amount of the deemed distribution or offset distribution.  The deemed distribution or offset distribution is the outstanding balance on the loan, not the original loan amount.