Is HELOC or Home Equity Loan Interest Tax Deductible?
Plain English, 2026
Last verified: April 2026
The two-sentence answer: HELOC and home equity loan interest is only tax deductible if the money is used to buy, build, or substantially improve the home that secures the loan. If you use the money for anything else, the interest is not deductible.
The rule that changed everything: TCJA 2017
Before 2018, the IRS allowed homeowners to deduct interest on up to $100,000 of home equity debt, regardless of how the money was used. You could use it for a vacation, a car, or your children's education and still deduct the interest.
The Tax Cuts and Jobs Act of 2017 (often called TCJA, effective January 1, 2018) changed this. Under TCJA rules that apply through 2025 and which are likely to be extended or made permanent, the deduction now depends entirely on what you do with the money, not simply on the fact that it is a home equity loan or HELOC.
YES: uses that qualify for the deduction
- Kitchen or bathroom remodel
- Room addition or extension
- New roof, windows, or doors
- New HVAC system (heating, ventilation, air conditioning)
- Basement finishing
- Major landscaping (permanent, adds value)
- Swimming pool or other permanent structures
- Accessibility improvements (wheelchair ramps, grab bars)
The funds must be spent on the home that secures the loan. You cannot use a HELOC on your primary home to improve a second property and deduct the interest.
NO: uses that do NOT qualify
- Paying off credit card debt
- College tuition or education expenses
- Buying a car or recreational vehicle
- Vacation
- Wedding expenses
- Investing in stocks or other assets
- Medical expenses
- Starting a business
What counts as "substantially improve"?
The IRS requires that the expense "add value to the property, prolong its useful life, or adapt it to new uses." A full kitchen remodel clearly qualifies. Repainting rooms or replacing worn carpeting (maintenance rather than improvement) is less clear and may not qualify. If you are unsure, document the work and consult a tax professional.
The $750,000 cap
The deduction applies to the interest on combined "acquisition debt" (your mortgage) plus "home improvement debt" (qualifying HELOC or HEL use) up to $750,000 total for loans originated after December 15, 2017. If you have a $600,000 mortgage and take a $200,000 HELOC, the combined $800,000 exceeds the cap; you can only deduct interest on $750,000 worth of debt.
For couples filing separately, the cap is $375,000 each. For loans originated before December 16, 2017, the old $1,000,000 cap still applies (those loans are "grandfathered").
You must itemise to claim it
You can only deduct the interest if you itemise your deductions on Schedule A, rather than taking the standard deduction. In 2026, the standard deduction is approximately $14,600 for single filers and $29,200 for married filing jointly.
Many homeowners' total itemised deductions (mortgage interest, property taxes, state and local taxes, charitable contributions) do not exceed the standard deduction. In that case, the home equity interest deduction is irrelevant because you would not itemise anyway.
Three worked examples
You draw $30,000 from a HELOC and use it all to remodel your kitchen. Interest on the HELOC is $2,580/year at 8.6%.
Fully deductible (assuming you itemise and total debt is within the $750,000 cap). You can deduct $2,580 from your taxable income.
You draw $30,000 total. $20,000 goes to the kitchen remodel. $10,000 pays off credit cards.
Two-thirds deductible. The interest on the $20,000 home-improvement portion is deductible. The interest on the $10,000 used for debt consolidation is not. If total HELOC interest is $2,580, approximately $1,720 is deductible and $860 is not.
You draw $30,000 from a HELOC and use it all to pay tuition. Interest on the HELOC is $2,580/year.
Not deductible. Tuition is not a qualifying use under TCJA. Zero of the $2,580 interest can be deducted. The interest effectively disappears as a lost cost.