Last reviewed: October 15, 2026. Based on IRS Publication 936 (2025), prepared for 2025 tax returns, and IRS news release IR-2018-32.
Many people assume that because a HELOC is secured by a home, its interest is automatically deductible like mortgage interest. That is not how the federal rules work today. What decides deductibility is mostly what you spend the borrowed money on, not what the loan is called. This guide summarizes the rule in plain language so you can ask the right questions. It is general information, not tax advice.
IRS Publication 936 says that, regardless of when the debt was incurred, you cannot deduct interest on a home-secured loan to the extent the proceeds were not used to buy, build, or substantially improve the home that secures the loan. In other words, interest on a HELOC or home equity loan can qualify only when the money goes into the home itself. The IRS has made the same point since 2018: the loan's label does not control, how you spend the money does. (Sources: IRS Publication 936 (2025), the Reminders section; IRS news release IR-2018-32, February 21, 2018, which the IRS marks as historical.)
| How the HELOC money is used | Interest potentially deductible? |
|---|---|
| Building an addition to the home that secures the loan | Potentially yes |
| Substantial improvements such as a new roof or a kitchen remodel | Potentially yes |
| Paying off credit cards or student loans | No |
| Buying a car, paying tuition, or covering living costs | No |
| Buying a second home using a HELOC on your main home | No (the home securing the loan must be the one bought, built, or improved) |
The IRS gives examples of its own. If you take a $250,000 home equity loan on your main home to build an addition, and your total qualifying debt is within the limit, the interest is deductible. If the same loan paid off student loans or credit cards, the interest is not.
Publication 936 states that you can deduct home mortgage interest on the first $750,000 of indebtedness ($375,000 if married filing separately). Higher limits of $1 million ($500,000 if married filing separately) apply to debt incurred before December 16, 2017. The limit covers all qualifying home loans together, so a first mortgage and a qualifying HELOC share it. Tax law changes, so check IRS.gov/Pub936 for the rules that apply to the year you are filing.
Mortgage interest is claimed as an itemized deduction on Schedule A. If you take the standard deduction instead, you receive no separate benefit from the interest, even if it would otherwise qualify. Whether itemizing makes sense for you depends on your whole return, and a tax professional can run both ways.
Suppose you open a $60,000 HELOC, draw all of it, and spend $40,000 on a kitchen remodel and $20,000 on credit cards. Over the year you pay $4,800 in HELOC interest. A simple proportional illustration would treat two-thirds of the balance, $40,000 of $60,000, as used to improve the home, so about $3,200 of the interest might be eligible, while the other $1,600 would not. This is only a simplified picture. Publication 936 has its own allocation and tracing rules, and your actual figures depend on when the money was spent and how payments are applied, so use the IRS instructions or a tax professional for the real calculation.
If you are comparing a HELOC with other ways to pay for a project or to consolidate debt, do not count on a tax deduction as part of the savings unless the money truly goes into the home and you itemize. Even then, the interest rate and your ability to repay should drive the decision. Our payment shock guide covers the repayment side, and the calculator shows how much room you might have.