Are HELOCs Tax Deductible?
Updated: January 27, 2026 • 6 min read
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<p><span>Bennett Leckrone is the editorial manager and an analyst for Lower. He specializes in making complicated mortgage topics accessible for consumers. That includes both in-depth product guides and in-depth analysis on what economic moves mean for homebuyers and refinancers.</span></p>
<p><span>He was previously a business reporter with a focus on higher education and fintech at BestColleges. In that role, he reported on the development of fintech and AI curriculum, as well as the rapidly changing nature of finance education. He also wrote guides to help business students navigate AI and online education.</span></p>
<p><span>He also reported on state politics at Maryland Matters, with a focus on how policy affected people and businesses. He holds a bachelor of science in journalism degree from Ohio University.</span></p>
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Key Takeaways
- HELOC interest is tax deductible, but only for limited purposes
- HELOC interest is only tax deductible when the funds are used to buy, build, or substantially improve the home that secures the line.
- That means other uses, like debt consolidation, aren’t tax deductible.
Tap into more home equity than almost any other lender.
Home equity lines of credit (HELOCs) can unlock low-cost cash, but the tax treatment of the interest depends on how you use the money.
Under current federal rules, HELOC interest (as well as home equity loan interest)is tax deductible only when the funds are used to buy, build, or substantially improve the home that secures the line. Even then, HELOCs are only deductible up to the IRS mortgage-debt limits outlined Publication 936.
If you use a HELOC for personal expenses such as debt consolidation or tuition, the interest isn’t deductible. You must also itemize on your tax return to claim it.
Keep in mind that tax laws are complex and subject to change. Lower does not provide tax advice. Please consult a tax advisor or CPA to determine whether home equity loan interest is deductible for you.
Below, we break down the qualifying uses, limits, and documentation you’ll need.
Understanding HELOC Tax Deductibility
A HELOC is a revolving line of credit secured by your home, typically with a variable rate and the flexibility to borrow, repay, and borrow again during the draw period. By contrast, a home equity loan is a fixed, lump‑sum loan.
For federal taxes, the key principle is the use of funds. As outlined in IRS Publication 936, HELOC interest is deductible only if the borrowed money is used to buy, build, or substantially improve the same home that secures the HELOC.
This spending-based rule applies under current IRS guidance, which matters because many homeowners tap HELOCs for varied purposes. The deduction follows the project, not the product.
Key Conditions for Deducting HELOC Interest
To qualify as deductible mortgage interest, all of the following must be true:
- The funds are used to buy, build, or substantially improve the home that secures the HELOC.
- The home is pledged as collateral for the HELOC.
- You can substantiate and trace the spending to qualified use with documentation.
Common non‑qualified uses include consolidating credit card balances, paying tuition, funding a vehicle purchase, or investing in stocks. Interest on those non-qualified uses is not deductible.
Qualified residence interest is interest on home acquisition debt. That’s debt used to acquire, build, or improve your primary or secondary home, subject to IRS mortgage‑debt limits.
Limits on Deductible HELOC Interest
Even when your use of funds qualifies, the deduction is capped by the IRS limits on total mortgage acquisition debt.
|
Debt origination date |
Filing status |
Combined acquisition debt limit |
|
After Dec 15, 2017 |
Single or Married Filing Jointly |
$750,000 |
|
After Dec 15, 2017 |
Married Filing Separately |
$375,000 |
|
On or before Dec 15, 2017 |
Single or Married Filing Jointly |
$1,000,000 |
|
On or before Dec 15, 2017 |
Married Filing Separately |
$500,000 |
These caps apply to the combined balances of all mortgages, HELOCs, and home equity loans that qualify as acquisition debt used to buy, build, or improve your qualified home.
If your eligible balances exceed the applicable cap, only the portion up to the limit is deductible. For example: If you have $800,000 of eligible acquisition debt originated in 2019, the $750,000 cap means 750,000 ÷ 800,000 = 93.75% of your interest would be deductible.
Impact of the 2017 Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (TCJA) reshaped home interest deductions beginning in 2018.
It restricted HELOC interest deductions to acquisition or substantial improvement uses and lowered the acquisition debt cap from $1,000,000 to $750,000 for newer loans. Before 2018, more uses and higher limits often qualified. These TCJA changes rules remain reflected in current IRS guidance.
How to Document and Claim HELOC Interest Deductions
You must itemize deductions to claim HELOC interest.
Here’s what to do and keep:
- Itemize on Form 1040 Schedule A for the tax year you paid interest.
- Retain Form 1098 from your lender showing total mortgage interest paid.
- Keep invoices, receipts, contracts, and bank records that clearly link HELOC draws to qualified home purchase or improvement costs.
Practical Considerations Before Taking a HELOC
A HELOC solely for a possible tax break rarely makes sense. Standard deductions have been elevated under the TCJA era, so fewer households itemize. More importantly, consider the broader financial tradeoffs.
Key factors to weigh:
- Your planned use of funds and whether it will qualify for any deduction.
- Effects on your home equity, future refinancing options, and resale flexibility.
- The likelihood you’ll itemize deductions in the relevant tax year.
- Rate environment, variable‑rate risk, and closing costs (often 2%–5% of the line amount).
Comparing options? See Lower’s expert comparison of cash‑out refinance vs. HELOC to evaluate costs and flexibility.
Frequently Asked Questions About HELOC Tax Deductibility
Is HELOC interest tax deductible?
HELOC interest is deductible only if the funds are used to buy, build, or substantially improve the home securing the line; personal uses like debt payoff or tuition don’t qualify.
What are the deduction limits for HELOC interest?
Your deduction is limited by total acquisition debt caps—$750,000 for loans originated after December 15, 2017, and $1,000,000 for older loans, with lower limits if married filing separately.
Do I need to itemize deductions to claim HELOC interest?
Yes. You must itemize on Schedule A; you cannot take the standard deduction and also deduct HELOC interest.
What documentation is required to deduct HELOC interest?
Keep Form 1098 from your lender plus receipts, invoices, and contracts that prove the HELOC funds were used for qualified home purchase or improvement costs.