Is the Interest on a Home Equity Loan or HELOC Tax Deductible?
Yes, but only in certain situations, and the rule is the same for both a home equity loan and a HELOC. Interest is generally deductible when the money is used to buy, build, or substantially improve the home that secures the loan, and only if you itemize deductions instead of taking the standard deduction. Interest on money used for other things, like paying off credit cards, consolidating debt, or covering tuition, typically is not deductible, even though the loan is secured by your house.
Last updated July 22, 2026When Is Home Equity Loan or HELOC Interest Deductible?
The key test is what the money is used for, not what the loan is called. Under the tax law change that took effect in 2018, interest on a home equity loan or HELOC is deductible only when the funds go toward buying, building, or substantially improving the home that secures the debt, such as a kitchen remodel, a room addition, or a new roof. This rule was set to expire after 2025 but was made permanent by tax legislation signed in 2025, so it remains the standard going forward. Use the money for something unrelated to the home, and the interest generally is not deductible, no matter how good your credit or how the loan is structured.
It Depends on Your Situation
- Funds used for home improvement, and you itemize deductions: Interest is generally deductible, subject to the usual mortgage debt limits.
- Funds used for other purposes (debt consolidation, tuition, general expenses), or you take the standard deduction: The interest deduction likely does not apply, or it provides no real tax benefit even if it technically qualifies.
Are Points and Origination Fees Deductible Too?
Discount points and true origination points (fees charged as a percentage of the loan in place of a higher rate) can also count as deductible prepaid interest, if they meet IRS requirements. For a home equity loan or HELOC, though, these points are typically deducted ratably, meaning spread out in small amounts over the life of the loan, rather than all at once in the year you pay them. Immediate full deductibility in one year mainly applies to points paid when buying or building a main home. Fees for specific services, such as an appraisal, title work, notary, or recording, are not deductible as interest at all.
Does the Standard Deduction Change Things?
Since the standard deduction increased substantially in 2018, many homeowners no longer benefit from itemizing at all, which means the home equity interest deduction can end up being worth nothing in practice. Tax policy research shows the share of taxpayers who actually benefit from the mortgage interest deduction dropped from roughly one in five before the change to roughly one in twelve afterward. If your total itemized deductions, including mortgage and home equity interest, do not exceed the standard deduction for your filing status, claiming the interest separately typically will not lower your tax bill.
| Funds used to buy, build, or substantially improve the home securing the loan, and you itemize | Yes, subject to mortgage debt limits |
|---|---|
| Funds used for debt consolidation, tuition, or other non-home purposes | Typically no |
| You take the standard deduction instead of itemizing | Deduction likely provides no benefit |
| Discount points and origination fees on the loan | Generally yes, but usually spread over the loan term rather than deducted all at once |
| Fees for appraisal, title, notary, or recording | No, these are not interest |
Related questions
Sources
- https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law
- https://www.irs.gov/publications/p936
- https://www.irs.gov/taxtopics/tc504
- https://taxpolicycenter.org/briefing-book/how-did-tcja-change-standard-deduction-and-itemized-deductions
Educational information only, not individualized financial or legal advice. Program details and rates change; verify current terms with a licensed loan officer before making a decision.