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Frequently Asked Question

If I borrow money from my 401k to purchase a home, is the interest I pay back to my 401k deductible as mortgage interest on my 1040?

Answer: The interest you pay on money you borrow from 401k plan to buy a home is not deductible as mortgage interest, because the loan is not secured by the home. The mortgage must be a secured debt on a qualified home. Your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. The term "qualified home" means your main home or second home. For details, refer to IRS Publication 936 , Home Mortgage Interest Deduction.

This is for educational purposes only. The information provided here is intended to help you understand the general issue and does not constitute any tax, investment or legal advice. Consult your financial, tax or legal advisor regarding your own unique situation and your company's benefits representative for rules specific to your plan.


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