Is HELOC Interest Tax Deductible? A 2026 Guide

This is general information, not tax advice. I am a mortgage loan officer, not a tax professional. What follows is an accurate description of the published IRS rule and where to find it. Whether it applies to your return is a question for a CPA or enrolled agent who can see your full picture.

The rule in one sentence

Interest on a HELOC is deductible only to the extent you used the money to buy, build, or substantially improve the home that secures the loan — and only within the overall mortgage-debt limits.

It is not about the product. It is about the spending.

Straight from the source

Two homeowners can take identical $75,000 HELOCs against identical homes on the same day at the same rate. One remodels a kitchen; the other pays off credit cards. Only the first one is looking at deductible interest.

IRS Publication 936 states it directly:

"Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer's home that secures the loan. The loan must be secured by the taxpayer's main home or second home (qualified residence), and meet other requirements."

And in its reminders section, more bluntly:

Home equity loan interest. No matter when the indebtedness was incurred, you can no longer deduct the interest from a loan secured by your home to the extent the loan proceeds weren't used to buy, build, or substantially improve your home.

Note the phrasing "to the extent." This is not necessarily all-or-nothing. If you draw $60,000 and put $40,000 into a qualifying addition and $20,000 into a car, the treatment follows the split. Which is precisely why recordkeeping matters.

The part most articles still get wrong

If you search this topic, you will find a great deal of content — including material published in 2026 — describing these rules as temporary, set to expire after 2025, and likely to revert to the more generous pre-2018 treatment.

That is out of date.

The restriction originated in the Tax Cuts and Jobs Act of 2017, which did carry a scheduled sunset after 2025. The One Big Beautiful Bill Act (Public Law 119-21), signed July 4, 2025, made the home-equity provisions permanent.

The practical consequence: do not plan around a reversion. Before 2018, interest on home equity debt was broadly deductible up to $100,000 regardless of what you spent it on. Some homeowners are still making decisions on that basis, or waiting for it to return. It is not returning under current law.

Publication 936 reflects this — the language is stated without an expiration and applies "no matter when the indebtedness was incurred."

The dollar limits

Qualifying use gets you in the door. The limits determine how much comes through it.

Your total qualifying mortgage debt — first mortgage plus qualifying home equity borrowing, combined — is capped at:

These are not separate buckets. It is one combined ceiling across your main home and second home. A homeowner with a $700,000 first mortgage taken in 2023 has limited room beneath the $750,000 cap regardless of how much equity the property holds or how impeccably the HELOC funds were spent.

There is also a narrow binding-contract exception: a taxpayer who entered a written binding contract before December 15, 2017 to close on a principal residence before January 1, 2018, and who purchased before April 1, 2018, is treated as having incurred the debt before December 16, 2017 and may use the higher thresholds.

What generally qualifies — and what generally doesn't

Generally qualifying — money spent to buy, build, or substantially improve the securing home:

• Additions and expansions
• Kitchen and bathroom remodels
• Finishing a basement or attic
• Roof replacement as part of a substantial improvement
• Major systems replacement — HVAC, electrical, plumbing — where it constitutes an improvement rather than a repair
• Permanent structural additions such as a deck, garage, or in-ground pool

Generally not qualifying — regardless of how sensible the spending is:

• Paying off credit cards or other consumer debt
• Tuition and education costs
• Medical expenses
• Vehicle purchases
• Investments, including a down payment on a separate rental property
• Routine repair and ordinary maintenance
• Improvements to a property other than the one securing the loan

The line between "repair" and "substantial improvement" is genuinely fact-dependent and is exactly where a tax professional earns their fee. Patching a section of roof after a storm and replacing the entire roof as part of a renovation can land differently.

Four things to do if you intend to deduct

1. Document the spending as you go, not at tax time. Keep contracts, invoices, permits, and payment records tying draws to qualifying work. If your treatment is ever questioned, substantiation is your responsibility.

2. Don't commingle if you can avoid it. Mixed-use draws are permitted — the rule is "to the extent" — but proving the split is much harder when the money passed through a general checking account alongside everything else.

3. Confirm you'll actually itemize. All of this is moot if you take the standard deduction. Mortgage interest is an itemized deduction, and a large share of households do better with the standard deduction. Deductibility is a reason to keep good records; it is rarely a good reason by itself to borrow.

4. Ask before you spend, not after. The determination follows the use of the funds. Once the money is spent, the treatment is set. A short conversation with your tax professional beforehand can change the sequence in ways that matter.

The bottom line

Deductibility is a function of what you do with the money, capped by how much total mortgage debt you carry. It is a genuine benefit for homeowners financing substantial improvements — and a benefit that simply does not exist for debt consolidation, tuition, or medical costs, no matter how good those reasons are on their own terms.

Plan around the current rule, which is permanent as of 2025. And confirm your specific situation with a qualified tax professional before you file.