No, the percentage of interest on the money you borrowed for debt consolidation is not deductible.
For tax years 2018 through 2025, you can only deduct the interest from the amount of your loan that was used to buy, build, or improve the home that it’s secured by.
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.
Don’t worry, we’ll help figure out what amount of interest you can deduct.
Examples of common ways you might have used this money not on your home include:
- Making a downpayment on a different home
- Funding improvements on a different home
- Making a payment on a different loan or debt
- Having miscellaneous large purchases
Example: John took out a home equity line of credit on his home on Tuberose Street for $40,000. He used $25,000 to remodel his kitchen and bathrooms in his Tuberose Street home, and $15,000 as a downpayment on a second house on Snowdrop Lane. He can only deduct the interest he paid on $25,000 he used to improve his Tuberose Street home.
