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Can I deduct interest on a home equity loan or a HELOC?

The interest for a home equity loan or HELOC (home equity line of credit) is an allowable deduction if you itemize. You'll need to meet some conditions:

  • The loan or line of credit is secured (put up as collateral to protect the lender) by your main home or a second home.
  • The home securing the loan must have sleeping, cooking, and toilet facilities.
  • The loan or line of credit must be used to buy, build or substantially improve your home. This is a new requirement for tax years 2018 through 2025.
  • You can only deduct the portion of the loan or line of credit you used to buy, build, or substantially improve the home that is used to secure the loan or line of credit. This is a new requirement for tax years 2018 through 2025. If you’ve ever used part of this loan to pay for things other than this home, you cannot deduct the interest from that amount of the loan, even if the transaction didn’t take place this year.
  • To get the full deduction, your mortgage debt doesn’t exceed $1,000,000 if you got your loan between October 13, 1987 and December 15, 2017 or $750,000 if you got your loan after December 15, 2017.
  • You or someone on your tax return must have signed or co-signed the loan.
  • If you rented out the home, you must have used the home more than 14 days during the tax year or 10% of the number of days you rented it out, whichever is greater.

In most cases, you can deduct your interest. How much you can deduct depends on the date of the loan, the amount of the loan, and how you use the loan proceeds.

The IRS has more information on how much you can deduct and other relevant details.

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