Leaving a job with an outstanding 401(k) loan doesn’t have to mean an immediate tax hit — a plan loan offset gets an extended deadline to roll over the balance and avoid tax entirely.
How it works
Subtracting the amount rolled over from the loan offset amount gives the taxable amount; applying the marginal tax rate gives the income tax, and adding a 10% penalty if under age 59½ gives the total tax owed.
What this does not include
This does not include the specific extended deadline itself — the tax filing due date, including extensions, for the year of the offset — which gives far more time than the standard 60-day rollover window most other distributions face.
How to use this calculator
- Enter the loan offset amount, amount rolled over, marginal tax rate, and whether you’re under age 59½.
Frequently asked questions
What triggers a plan loan offset?
Most commonly leaving an employer with an outstanding 401(k) loan balance, or the plan terminating, at which point the unpaid loan balance is treated as a distribution unless rolled over.
Where do I get the money to roll over if I already spent it?
From any source — the rollover doesn’t have to come from the actual loan proceeds; a participant can use other savings to complete the rollover and avoid the tax hit.
Is this the same as a standard hardship withdrawal?
No — a loan offset happens because an existing loan becomes due and unpaid, not because of a new hardship distribution election; the extended rollover deadline is specific to loan offset amounts.
