Is Home Equity Loan Interest Deductible in 2026?
If you’re considering a home equity loan and wondering whether you can deduct the interest on your taxes, the answer is: maybe.
Home equity loan interest isn’t automatically deductible just because the loan is secured by your home. Under current IRS guidance, interest on a home equity loan or HELOC may be deductible only if the money is used to buy, build, or substantially improve the home that secures the loan, subject to mortgage interest deduction limits and other requirements.
This blog breaks down when home equity loan interest may qualify, when it usually doesn’t, and what records you may need.
Home equity loan interest may be deductible if:
Using the money for something else—such as paying off credit cards, taking a vacation, buying a car, or covering personal expenses—generally makes the interest nondeductible. The IRS says interest on home equity debt used for personal living expenses, including credit card debts, isn’t deductible.
Interest may be more likely to qualify when the borrowed funds went toward the home that secures the loan. If the same loan was used for debt consolidation, tuition, travel, or general living expenses, the interest generally doesn’t qualify.
There are also debt limits. IRS Publication 936 and IRS Topic 505 explain that mortgage interest may be limited based on the mortgage date, filing status, and total mortgage debt. For many mortgages taken out after December 15, 2017, to buy, build, or substantially improve a home, the limit is $750,000, or $375,000 if married filing separately. Different limits may apply to older debt.
Home equity loan interest may qualify when the money is used for substantial home projects, such as:
Documentation matters. It may help to keep invoices, receipts, contracts, loan records, and bank statements showing how the money was used.
Home equity loan interest generally doesn’t qualify when the funds are used for:
If you used one home equity loan for both qualifying and nonqualifying expenses, only the portion tied to qualifying home costs may be deductible.
For example, if you borrowed $50,000 and used $30,000 for a kitchen remodel and $20,000 to pay off credit cards, the interest tied to the kitchen remodel may qualify. The interest tied to the credit card payoff generally wouldn’t. You’d need records showing how the loan proceeds were split.
In IRS Publication 530, the IRS describes an improvement as work that materially adds to a home’s value, considerably prolongs its useful life, or adapts it to new uses.
Projects that may qualify include:
Costs that usually don’t qualify include:
The general test is whether the work meaningfully improves the home, extends its useful life, or adapts it to a new use. If it only keeps the home in ordinary operating condition, it may not qualify.
Before 2018, the rules were broader. The IRS says that for tax years before 2018, interest paid on a home equity loan or line of credit secured by a main or second home may have been deductible, subject to dollar limits, regardless of how the loan proceeds were used.
That’s why you may see conflicting information online. Older articles may say home equity loan interest is deductible in more situations. Under current IRS guidance, the money generally must be used to buy, build, or substantially improve the home that secures the loan.
Tax rules can change, so check the latest IRS guidance or talk with a tax professional before filing.
The amount you can deduct depends on several factors:
If you have multiple mortgages or home equity loans, the calculation can get complicated. A tax professional can help determine what portion, if any, may qualify.
Maybe. Some lenders issue Form 1098, Mortgage Interest Statement, to report mortgage interest paid. The IRS says Form 1098 is generally used to report mortgage interest of $600 or more received from an individual during the year in the course of a trade or business.
But receiving a Form 1098 doesn’t automatically mean the interest is deductible. The form reports interest paid; it doesn’t determine whether your use of the loan proceeds qualifies.
Review your Form 1098, loan documents, and records showing how the money was used. If you’re unsure, ask a tax professional before claiming the deduction.
If the interest qualifies, you generally claim it as an itemized deduction on Schedule A. IRS Publication 936 explains that deductible home mortgage interest reported on Form 1098 is generally reported on Schedule A, but home equity loan or HELOC interest isn’t deductible if the proceeds weren’t used to buy, build, or substantially improve the home.
Home equity loan interest isn’t automatically deductible just because the loan is secured by your home.
The key question is how you used the money:
It can help to keep documentation showing where the money went, and you may want to talk to a tax professional about whether your situation qualifies and how to report it.
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