Is the Interest on a Home Equity Loan or HELOC Tax Deductible?
Sometimes. The rule is the same for a home equity loan and a HELOC: the interest is generally deductible only if you use the money to buy, build or substantially improve the home that secures the loan, and only if you itemize. Money used for anything else, like paying off credit cards or covering tuition, generally doesn't qualify, even though the loan is secured by your house.
Last updated September 29, 2026When is the interest deductible?
What counts is how you use the money, not what the loan is called. Since 2018, home equity interest has been deductible only when the funds go to buying, building or substantially improving the home that secures the debt, like a kitchen remodel, an addition or a new roof. That rule was scheduled to end after 2025, but 2025 tax legislation made it permanent.
It's also capped. The debt used to buy, build or improve your home, first mortgage and home equity combined, counts only up to $750,000, or $375,000 if you're married and filing separately.
Are points and origination fees deductible?
Discount points, and origination fees charged as a percentage of the loan instead of a higher rate, can count as prepaid interest if they meet IRS rules. On a home equity loan or HELOC, they're generally deducted gradually over the life of the loan rather than all at once; deducting them in the year paid mainly applies to points on a loan to buy or build your main home. Fees for services like the appraisal, title work or recording aren't interest and aren't deductible as interest.
Does the standard deduction change things?
Often. The standard deduction grew a lot in 2018, and many homeowners no longer come out ahead by itemizing. Tax policy research found the share of taxpayers benefiting from the mortgage interest deduction fell from roughly one in five to roughly one in twelve after the change. If your itemized deductions, including mortgage and home equity interest, don't beat your standard deduction, the interest won't lower your tax bill.
It depends on your situation:
- You used the money to improve the home and you itemize: the interest is generally deductible, within the $750,000 limit.
- You used it for other things, or you take the standard deduction: it likely won't help your taxes.
- You're not sure how your use of the money counts: ask a tax professional.
| Used to buy, build or substantially improve the home, and you itemize | Yes, within the debt limit |
|---|---|
| Used for debt payoff, tuition or other purposes | Generally no |
| Debt limit | $750,000 total, or $375,000 married filing separately |
| You take the standard deduction | No tax benefit |
| Points on a home equity loan or HELOC | Generally deducted over the loan's life |
| Appraisal, title or recording fees | 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
Sourced from licensed loan officers and brokers in the FreeRateUpdate network.
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.