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After Tax Dollars. Any loan you take is repaid in after tax dollars and 401k loans are no different. The money you take out is not taxed so you get the benefit of that.

Technically you can default on it and not repay it at all - then you are hit with the big penalty tax as it would be considered a distribution. So it's up to you - pay it with after tax money, or don't pay it and get hit with the tax and the penalty for early withdrawal tax.

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Q: Are 401k loan repayments pre tax dollars or post tax dollars?
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