Tax Facts

3965 / How does the interest deduction apply to qualified plan loans?

Updated: December 10, 2024 at 08:05 AM


An employee is not allowed an interest deduction with respect to a loan (otherwise meeting the requirements explained in Q 3954) made after 1986 during the period on or after the first day on which the borrower is a key employee ( Q 3931) or in which the loan is secured by elective contributions made to a 401(k) plan or tax sheltered annuity.1 Loans from a qualified retirement plan do not qualify as a qualified education loan for which an interest deduction is available.2





1.  IRC § 72(p)(3).

2.  Treas. Reg. § 1.221-1(e)(3)(iii).


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