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Level 5

HELOC loan

is the interest on a HELOC loan purchased in 2018 tax deductible?

4 Replies
Level 20

HELOC loan

It depends on what you used that money for. If used to upgrade/update the property that secures the loan, then it's deductible. If used to fix up a property other than the one that secured the loan, then that property address will be in box 8 of the 1098 and you can deduct the interest of that property.

If box 7 is not checked and no other property is listed in box 8, yet you did "in fact" use it to fix up real estate property, you can still deduct it. But be prepared to prove your claim (usually with receipts) if audited on it.

If you only used part of the funds for real estate, then you can only claim the interest paid on that portion of funds used for that purpose.

Level 2

HELOC loan


@Carl wrote:

If you only used part of the funds for real estate, then you can only claim the interest paid on that portion of funds used for that purpose.


I took out a HELOC in 2017 part of which was used for home improvements (new furnace and AC) and other part not related to home improvement.  I have the 1098 for the HELOC showing the total interest paid in 2018 but how would I calculate how much I can claim?  Thanks in advance,

Level 3

HELOC loan

I too refinanced in 2017; paid off a mortgage loan, paid off an equity loan, consolidated credit card debt, and purchased a used car.  Yes, I did use the new loan for a purpose other than our home.  All amounts were under $146,000.  With much equity in our home (over $500,000), I thought I could use the money for whatever I wanted as long as the debt was being repaid.  The new interest deduction is confusing.  Does it only apply to refinancing done in 2018?

Highlighted
Employee Tax Expert

HELOC loan

The portion of your home loan that was not used to buy, build, improve your home and was less than $100,000 ($50,000 if filing as Married Filing Separately) is grandfathered in if refinanced prior to 2018.  This linked article has various scenarios and FAQs that may help you better.