topic Do I need to claim my new (second) 1098 Home Equity Loan Interest? in Deductions & credits

Do I need to claim my new (second) 1098 Home Equity Loan Interest?

thejademoon — Tue, 10 Feb 2026 10:07:18 GMT

I used my first home equity loan to replace the roof on my house. I still pay that loan even though I used it up. I already claim the interest of this loan. I took out a second home equity loan for a medical procedure that I ended up not needing (side saga I wont get into). I have not spent anything of this loan yet and I will most likely use it for more home improvements (fence, power wash and paint, new floors, etc.). Since I have not spent any of this loan, should I skip claiming it? Can I claim it later on if I do end up using it for home improvement?

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

DoninGA — Thu, 11 Jan 2024 23:05:00 GMT

If you have not used the 2nd equity loan there will not be any interest paid so there is no need to report this loan on a tax return.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

thejademoon — Thu, 11 Jan 2024 23:06:51 GMT

I still have to make monthly payments even though I have not spent it. So yes I have been paying interest in the monthly payments. This is NOT a line of credit, this is just a Home Equity Loan.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

DoninGA — Thu, 11 Jan 2024 23:11:02 GMT

In that case then, Yes, you should enter this loan on your tax return and the interest paid on the loan in 2023.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

thejademoon — Thu, 11 Jan 2024 23:11:31 GMT

Even if I have not spent it at all? I thought you only claim if you use the Home Equity Loan on improving your home equity? I can't show anything for the interest because I have not spent anything yet. I will in 2024, but I did not spend anything in 2023 even though I have paid 6 months worth of interest since I closed on it.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

Opus 17 — Thu, 11 Jan 2024 23:15:23 GMT

You can deduct mortgage interest on your acquisition cost, money used to buy, build, or substantially improve your home.

You can deduct the interest on loan 1. You can't currently deduct the interest on loan 2, and the only thing in your to-do list that would qualify as a substantial improvement is new floors, and maybe a new fence. Repairs and routine maintenance do not count as substantial improvements. However, any improvements you make only count as acquisition costs for the interest deduction if the work is completed in 2 years or less from the date you took out the loan. If you sit on the money too long, it won't count as deductible interest even if you use it for improvements.

The IRS formula for deducting mortgage interest requires that you enter both loans and then report how much, if any, you used for acquisition costs. If you are paying interest on loan 2, and the money is sitting in the bank waiting to be used, you will get a 1098 for that mortgage and you need to list it so that Turbotax can include the balance in the calculation of the deductible percentage of total interest you can deduct.

For example, if your first loan is for $20,000 for the roof, and your second loan is $30,000 not currently used for improvements, then 40% of your total interest is deductible. The deductible amount is calculated on the total, not by listing one mortgage and ignoring the other.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

Opus 17 — Thu, 11 Jan 2024 23:16:07 GMT

@DoninGA wrote:

If you have not used the 2nd equity loan there will not be any interest paid so there is no need to report this loan on a tax return.

It's sounds like it might be a loan, not a line of credit.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

Opus 17 — Thu, 11 Jan 2024 23:17:04 GMT

@thejademoon wrote:

Even if I have not spent it at all? I thought you only claim if you use the Home Equity Loan on improving your home equity? I can't show anything for the interest because I have not spent anything yet. I will in 2024, but I did not spend anything in 2023 even though I have paid 6 months worth of interest since I closed on it.

It's not deductible interest, but you must list the loan, and answer questions about how much (if any) you spent on improvements. See my other answer.

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

DoninGA — Thu, 11 Jan 2024 23:20:39 GMT

See answers provided by @Opus 17

Re: Do I need to claim my new (second) 1098 Home Equity Loan Interest?

thejademoon — Thu, 11 Jan 2024 23:23:46 GMT

Perfect, thank you so much!

Yes, this is a lump sum loan, this is not a line of credit. My bank actually calls it a Mortgage rather than a Home Equity Loan. I will list the second 1098 in the section with the first one, and enter $0 on the question for what was spent on home improvements. Feel free to correct me if my interpretation of what I need to do is incorrect.