A 401(k) loan is not a withdrawal. IRC §72(p) and the IRS plan-loan FAQs cap a new loan at the lesser of $50,000 and the greater of $10,000 or 50% of your vested balance. You still cannot borrow more than you have vested.
$40,000 vested: maximum new loan $20,000.
Run the 401(k) loan calculator →
Your plan can refuse loans or use a lower cap. Outstanding loans usually reduce the $50,000 room. Defaulted loans can become taxable distributions and may trigger the 10% additional tax if you are under 59½. Estimate, not tax advice.
Direct answer: $40,000 vested → $20,000
- 50% of vested = $20,000.00
- Greater of $10,000 or 50% = $20,000.00
- Lesser of that and $50,000 = $20,000.00
- Never more than vested = $20,000.00
statutory = min($50,000, max($10,000, 50% × vested)) max loan = min(statutory, vested)
Checks you can re-run
| Vested balance | 50% of vested | Max loan | Why |
|---|---|---|---|
| $40,000 | $20,000 | $20,000.00 | Half, under the $50,000 cap |
| $15,000 | $7,500 | $10,000.00 | $10,000 floor, still ≤ vested |
| $8,000 | $4,000 | $8,000.00 | Cannot exceed vested |
| $200,000 | $100,000 | $50,000.00 | $50,000 dollar cap |
The $10,000 floor helps small balances, but it never lets you borrow money you do not have. At $8,000 vested the engine returns $8,000.00.
Loan vs cash-out
A loan that you repay is not the 10% additional tax. Cashing out is: early withdrawal 10%. A payout sent to you for a rollover withholds 20%: rollover withholding. If you still have deferral room this year, that is 401(k) contribution limit.
Leaving the job often makes the loan due. That is a plan rule, not in this ceiling.
What this is not
- Not a payment schedule or interest quote.
- Not a reduction for outstanding loans (out of v1).
- Not a hardship withdrawal.
$20,000.00.
Half is $7,500, so the $10,000 floor applies, still limited by vested.
Half is $100,000. The $50,000 statutory dollar cap binds.