Home Improvement Loan Tax Deduction

Forum|Forum|3 years ago
February 9, 2023
2 replies
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Last year we completed a large home renovation project and got two loans to finance the project. The first one is a HELOC and the second one is a "Home Improvement Loan" product from a CU (https://www.spectracu.com/products/personal-loans). We got 1098 from the first HELOC loan, but we don't have a similar document from the second loan. We are wondering if the second loan interest can also be deducted from our taxes?

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MayaD

Alumni - Intuit

No. The interest you pay on personal loans is not tax deductible.

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luisgarcia27Author

Level 2

Thank you for your answer and help.

Could you please provide some context or where in the tax code say that?

What are the requirements for home improvement loan tax deductions?

Thank you,

Best,

AnnetteB6

Level 15

In order to deduct interest on a loan, the loan must be secured by your residence so that it qualifies as home mortgage interest. For your personal residence, this is the only option to deduct any loan interest.

So, even though your personal loan proceeds were used to improve your residence, If the loan was not secured by your residence, then the interest is not deductible.

For reference, take a look at Publication 936 (2022), Home Mortgage Interest Deduction. Scroll down to Part 1 - Home Mortgage Interest where the type of interest that can be deducted is defined. There is a 'Note' in that section that states the loan must be secured by your residence to be deductible.

@luisgarcia27

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