1 Answer

Sorry, but since the money you've invested in your 401(k) hasn't been taxed yet, you can't get a tax break on losses in your 401(k) no matter how much your 401(k)'s value drops. And, much as I hate to weigh in against a potential tax break, this makes perfect sense.

Let's say, for example, you invest $5,000 in a 401(k) and over the course of a year, your investment loses 40 percent, or $2,000. And let's say that you pull the $3,000 you have left out of your account. (For the purposes of this example, let's assume there's no early withdrawal penalty.) Assuming you're in the 25 percent tax bracket, that would mean you would owe $750 in taxes, leaving you with $2,250 after taxes.

From CNN Money