diff --git a/python/src/com/jetbrains/python/formatter/PyBlock.java b/python/src/com/jetbrains/python/formatter/PyBlock.java
index 2120bf8fb5a5..a5128b7ae6c5 100644
--- a/python/src/com/jetbrains/python/formatter/PyBlock.java
+++ b/python/src/com/jetbrains/python/formatter/PyBlock.java
@@ -509,21 +509,15 @@ public class PyBlock implements ASTBlock {
 
   private static boolean isWhitespaceWithLineBreaks(@Nullable ASTNode node, int minCount) {
     if (isWhitespace(node)) {
-      for (ASTNode prevNode = node.getTreePrev(); isWhitespace(prevNode); prevNode = prevNode.getTreePrev()) {
-        node = prevNode;
-      }
-      while (isWhitespace(node)) {
-        final String nodeText = node.getText();
-        int count = 0;
-        for (int i = 0; i < nodeText.length(); i++) {
-          if (nodeText.charAt(i) == '\n') {
-            count++;
-            if (count == minCount) {
-              return true;
-            }
+      final String prevNodeText = node.getText();
+      int count = 0;
+      for (int i = 0; i < prevNodeText.length(); i++) {
+        if (prevNodeText.charAt(i) == '\n') {
+          count++;
+          if (count == minCount) {
+            return true;
           }
         }
-        node = node.getTreeNext();
       }
     }
     return false;
diff --git a/python/src/com/jetbrains/python/lexer/PythonIndentingProcessor.java b/python/src/com/jetbrains/python/lexer/PythonIndentingProcessor.java
index 4bad22c7ad76..80818476da58 100644
--- a/python/src/com/jetbrains/python/lexer/PythonIndentingProcessor.java
+++ b/python/src/com/jetbrains/python/lexer/PythonIndentingProcessor.java
@@ -143,6 +143,9 @@ public class PythonIndentingProcessor extends MergingLexerAdapter {
         if (text.charAt(i) == ' ') {
           spaces++;
         }
+        else if (text.charAt(i) == '\t') {
+          spaces += 8;
+        }
       }
       myCurrentNewLineIndent = spaces;
     }
@@ -317,7 +320,8 @@ public class PythonIndentingProcessor extends MergingLexerAdapter {
     // line break token
     int end = getBaseTokenEnd();
     advanceBase();
-    while (getBaseTokenType() == PyTokenTypes.SPACE || (!breakStatementOnLineBreak && getBaseTokenType() == PyTokenTypes.LINE_BREAK)) {
+    while (getBaseTokenType() == PyTokenTypes.SPACE || getBaseTokenType() == PyTokenTypes.TAB ||
+           (!breakStatementOnLineBreak && getBaseTokenType() == PyTokenTypes.LINE_BREAK)) {
       end = getBaseTokenEnd();
       advanceBase();
     }
diff --git a/python/testData/psi/TabInsideContinuationIndent.py b/python/testData/psi/TabInsideContinuationIndent.py
new file mode 100644
index 000000000000..6090700eb6f6
--- /dev/null
+++ b/python/testData/psi/TabInsideContinuationIndent.py
@@ -0,0 +1,3 @@
+x = {
+	'foo': 42,
+}
\ No newline at end of file
diff --git a/python/testData/psi/TabInsideContinuationIndent.txt b/python/testData/psi/TabInsideContinuationIndent.txt
new file mode 100644
index 000000000000..9743c77613ed
--- /dev/null
+++ b/python/testData/psi/TabInsideContinuationIndent.txt
@@ -0,0 +1,20 @@
+PyFile:TabInsideContinuationIndent.py
+  PyAssignmentStatement
+    PyTargetExpression: x
+      PsiElement(Py:IDENTIFIER)('x')
+    PsiWhiteSpace(' ')
+    PsiElement(Py:EQ)('=')
+    PsiWhiteSpace(' ')
+    PyDictLiteralExpression
+      PsiElement(Py:LBRACE)('{')
+      PsiWhiteSpace('\n\t')
+      PyKeyValueExpression
+        PyStringLiteralExpression: foo
+          PsiElement(Py:SINGLE_QUOTED_STRING)(''foo'')
+        PsiElement(Py:COLON)(':')
+        PsiWhiteSpace(' ')
+        PyNumericLiteralExpression
+          PsiElement(Py:INTEGER_LITERAL)('42')
+      PsiElement(Py:COMMA)(',')
+      PsiWhiteSpace('\n')
+      PsiElement(Py:RBRACE)('}')
\ No newline at end of file
diff --git a/python/testSrc/com/jetbrains/python/PythonParsingTest.java b/python/testSrc/com/jetbrains/python/PythonParsingTest.java
index d253db77f7c0..9bdc65e52428 100644
--- a/python/testSrc/com/jetbrains/python/PythonParsingTest.java
+++ b/python/testSrc/com/jetbrains/python/PythonParsingTest.java
@@ -463,6 +463,11 @@ public class PythonParsingTest extends ParsingTestCase {
     doTest();
   }
 
+  // PY-14408
+  public void testTabInsideContinuationIndent() {
+    doTest();
+  }
+
   public void doTest(LanguageLevel languageLevel) {
     LanguageLevel prev = myLanguageLevel;
     myLanguageLevel = languageLevel;