Borrowers Get More Time to Repay 401(k) Loans

If you leave your job while you have an outstanding 401(k) loan, Uncle Sam now gives you extra time to repay it -- thanks to the new tax law.

Question: I understand that the new tax law changed the deadline for repaying a 401(k) loan if you leave your job. How much time do borrowers now have? - S.C., Omaha

Answer: The new—and extended—deadline to repay the loan and avoid taxes and penalties is the due date of your tax return for the year you leave your job. Before, you had to repay the loan within 60 days of leaving your job to avoid taxes on the money, plus a 10% penalty if you left before age 55. If you file an extension for your tax return, you’ll have until October 15 of the year after you leave your job to repay the loan without penalties or taxes.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%
https://cdn.mos.cms.futurecdn.net/flexiimages/xrd7fjmf8g1657008683.png

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of Kiplinger’s expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of Kiplinger’s expert advice - straight to your e-mail.

Sign up
Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.