When you borrow against your home’s equity, the interest you pay every year is tax-deductible up to a government-imposed limit. However, the borrowed money has to be spent on buying, building or substantially improving your home to qualify for a deduction.
HELOC and home equity loan interest deduction rules
Home equity loans and home equity lines of credit, or HELOCs, are different products. But the rules are the same for deducting interest.
When is home equity interest deductible?
For the 2026 tax year, home equity interest is deductible only if the borrowed money was spent to "buy, build or substantially improve" the home securing the loan, according to the IRS. This means you can't deduct the interest if the home equity proceeds were spent on other things, such as college tuition or a car.
Deduction limits
Only interest up to a certain amount of mortgage debt is deductible. The limit applies to the combined amount of all loans secured by a property, including primary mortgages and home equity loans or HELOCs. The limit varies depending on when you took on the debt:
- Dec. 16, 2017, and later: You can deduct the interest on up to $750,000 of mortgage debt (or up to $375,000 if you're married and filing separately).
- Oct. 14, 1987, through Dec. 15, 2017: You can deduct the interest on up to $1 million of mortgage debt ($500,000 if married and filing separately).
- Oct. 13, 1987, or before: You can deduct all the mortgage interest.
If you’re unsure if you’re eligible to deduct your interest payments, consult a tax professional or contact your local IRS office.
IRS guidelines
Prior to 2018, interest from home equity loans and HELOCs was deductible regardless of how the loan was used. In 2017, the Tax Cuts and Jobs Act (TCJA) limited these deductions to instances only when the proceeds were used for home improvements.
This limitation was originally set to expire at the end of 2025. However, the passing of the One Big Beautiful Bill in July 2025 made it permanent.
Did you know...
With a home equity loan, you borrow a lump sum over a set term at a fixed interest rate. With a HELOC, you can access cash as needed up to the credit limit during the "draw period." Typically, you pay only interest at a variable rate during this time, and then repay the borrowed money plus interest in the repayment phase.» MORE: Tax deductions for homeowners
Itemizing or taking the standard deduction
To deduct the interest paid on your home equity loan (or your HELOC), you’ll need to itemize deductions at tax time using IRS Form 1040.
Itemizing is worth doing only if all your deductible expenses total more than the standard deduction. The standard deduction — a flat dollar figure set annually by the IRS — varies according to tax-filing status. The standard deduction for the 2026 tax year (for taxes due in April 2027) is:
- $32,200 for married couples filing jointly.
- $16,100 for single filers or married people filing separately.
- $24,150 for heads of households.
To decide whether to itemize or take the standard deduction, add up all your tax-deductible expenses. Besides mortgage interest, those may include other costs related to homeownership, such as property tax, and other outlays, such as charitable gifts.
Collect the right tax forms from your lender
Before tax time, you should receive an IRS Form 1098, or Mortgage Interest Statement, from your lender or lenders. It shows the interest you paid on your primary mortgage, home equity loan or HELOC in the previous year. You'll need this form if you want to deduct the interest on your home equity loan or line of credit. Call your lender if you don’t get a 1098 or if you want help in understanding it.
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