Legal Question in Tax Law in Michigan

401k loan for Purchase of Home

Whether one can borrow from one's 401k account at all will depend on the plan document. If the plan itself allows the participant to borrow from the account, then the tax laws come into play. The regulations allow a participant to borrow up to 50% of the account balance, to a maximum of $50,000, for the purchase of a principal residence in which the participant will reside. The loan may be for a commecially reasonable period, and must be repaid at prevailing interest rates.