Is HELOC Interest Tax Deductible? The 2026 Guide

Meta Description: Can you deduct HELOC interest on your taxes? The answer depends on what you use the money for—and whether you itemize. Here's what qualifies in 2026.

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Before you factor a HELOC tax deduction into your financial planning, here's something most articles won't tell you upfront: most homeowners can't use this deduction anyway.

That's not pessimism. It's math.

The standard deduction is so high ($15,000 for single filers, $30,000 for married couples in 2025) that unless you have significant itemizable expenses, your HELOC interest deduction won't save you a dime.

But if you do itemize—and if you use your HELOC for qualifying purposes—you could save thousands in taxes. Let's break down exactly who can benefit, what counts, and what's changing in 2026.

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TL;DR: Can You Deduct HELOC Interest?

Yes, BUT only if:

1. You itemize deductions (most people don't)
2. You use the HELOC funds to "buy, build, or substantially improve" the home securing the loan
3. Your total mortgage debt is under $750,000 ($375,000 if married filing separately)

Used your HELOC for debt consolidation, medical bills, or college tuition? Sorry—that interest isn't deductible under current rules.

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The Itemization Reality Check

Here's why most homeowners can't use the HELOC interest deduction.

2025 Standard Deduction:

• Single: $15,000
• Married Filing Jointly: $30,000
• Head of Household: $22,500

To benefit from itemizing, your total itemized deductions (mortgage interest, HELOC interest, property taxes, charitable donations, etc.) must exceed your standard deduction.

Example: Sarah is single with a modest mortgage. Her itemizable expenses:

• Mortgage interest: $8,000
• Property taxes: $4,500
• Charitable giving: $1,200
• HELOC interest: $1,800
• Total: $15,500

Her itemized total barely beats the $15,000 standard deduction—meaning she saves taxes on just $500 of deductions. That's roughly $110 in tax savings (at 22% bracket).

The reality: Unless you have a large mortgage, live in a high-tax state, or donate significantly to charity, itemizing doesn't make sense. And if you don't itemize, your HELOC interest deduction is worthless.

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What Qualifies: "Buy, Build, or Substantially Improve"

The IRS has specific language: HELOC interest is only deductible when the funds are used to "buy, build, or substantially improve" the home securing the loan.

What DOES Qualify

Home improvements that add value or extend useful life:

• Kitchen or bathroom remodel
• Room addition or finished basement
• New roof or siding
• HVAC system replacement
• Swimming pool or permanent landscaping
• Solar panel installation
• Foundation repairs
• New windows or doors
• Deck or patio construction

The key test: Does it add lasting value or extend the home's life?

What DOESN'T Qualify

General maintenance and non-improvement uses:

• Painting (interior or exterior)
• Carpet replacement
• Appliance purchases (unless built-in)
• Furniture
• Debt consolidation
• Medical bills
• College tuition
• Vehicle purchases
• Vacation expenses
• Business investments

Important: If you use part of your HELOC for qualifying improvements and part for non-qualifying expenses (like paying off credit cards), you can only deduct the interest on the qualifying portion. You'll need to track this carefully.

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Combined Mortgage Limits

There's a cap on how much mortgage debt qualifies for the interest deduction.

Current limits (through 2025):

• Married Filing Jointly: $750,000 combined mortgage + HELOC debt
• Married Filing Separately: $375,000 each
• Single: $750,000

This limit combines your primary mortgage AND your HELOC. If you owe $700,000 on your mortgage and take a $100,000 HELOC, only interest on the first $750,000 of total debt is deductible—even if all funds were used for qualifying improvements.

High-value homeowners take note: In expensive markets like California or New York, this limit can matter.

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2026 Tax Law Changes: What's Coming

Here's where things get interesting—and uncertain.

The current HELOC interest rules come from the Tax Cuts and Jobs Act (TCJA) of 2017. Before TCJA, you could deduct interest on home equity debt up to $100,000 regardless of how you used the money.

TCJA changed that: Since 2018, you can only deduct interest when used for home improvements. But TCJA was designed to sunset.

What's Scheduled to Happen After 2025

• The old rules may return: Interest on home equity debt up to $100,000 could become deductible again regardless of use
• The combined mortgage limit may increase: Could rise from $750K back to $1,000,000
• Nothing is certain: Congress could extend current rules, let them expire, or create entirely new rules

What This Means for You

If you're planning a HELOC in 2026:

• Don't assume you'll get a deduction for non-improvement uses
• Plan conservatively using current rules
• Watch for Congressional action in late 2025/early 2026
• Consider consulting a tax professional for your specific situation

If you already have a HELOC:

• Your situation may improve after 2025 if the old rules return
• Keep documentation of how you've used your funds either way

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How to Track & Document for Deduction

If you plan to claim the HELOC interest deduction, documentation is essential. The IRS can ask for proof that funds were used for qualifying improvements.

What to Keep

1. HELOC statements showing draw amounts and dates
2. Contractor invoices matching draw amounts to specific projects
3. Receipts for materials purchased with HELOC funds
4. Before/after photos of improvement projects
5. Permits if your project required them
6. Year-end mortgage interest statement (Form 1098)

Best Practice: Dedicated Account

Consider drawing HELOC funds to a separate checking account used only for the improvement project. This creates a clean paper trail showing exactly where the money went.

Partial Use Documentation

If you use your HELOC for mixed purposes (some qualifying, some not), you'll need to calculate what percentage went to improvements.

Example: You draw $50,000 from your HELOC:

• $35,000 for kitchen remodel (qualifying)
• $15,000 for debt consolidation (non-qualifying)

You can deduct 70% of your HELOC interest ($35,000 ÷ $50,000 = 70%).

Keep detailed records showing which draws went to which purpose.

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Should Tax Benefits Drive Your HELOC Decision?

Honestly? Probably not.

The HELOC tax deduction is a nice-to-have, not a reason to borrow money. Consider:

1. You're still paying interest. Even with a deduction, you're only recovering 22-37% of the interest cost (depending on your tax bracket). You're still out-of-pocket on the rest.

2. Most people can't itemize. Unless your total itemized deductions exceed the standard deduction, this benefit is purely theoretical.

3. Rules change. Tax law is a moving target. What's deductible today may not be tomorrow.

Better reasons to get a HELOC:

• Lower interest rates than credit cards or personal loans
• Flexible access to funds when needed
• Competitive rates for large expenses
• Building home equity while accessing it

If the tax deduction happens to apply to your situation, great. But it shouldn't be the deciding factor.

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Frequently Asked Questions

Is HELOC interest tax deductible for debt consolidation?

No. Under current rules (through 2025), HELOC interest is only deductible when funds are used to buy, build, or substantially improve your home. Debt consolidation doesn't qualify. This may change after 2025 if Congress allows TCJA rules to expire.

How much HELOC interest can I deduct?

You can deduct interest on up to $750,000 of combined mortgage and HELOC debt ($375,000 if married filing separately). This only applies to the portion used for qualifying home improvements, and only if you itemize deductions.

Do I need to prove how I used my HELOC funds?

Yes. The IRS can request documentation showing that HELOC funds were used for qualifying improvements. Keep invoices, receipts, and records of which draws funded which projects.

Is HELOC interest still deductible in 2026?

The rules are scheduled to change after 2025 when TCJA provisions sunset. Interest may become deductible regardless of use (under the old pre-2018 rules), but Congress could modify or extend current rules. Plan conservatively and watch for updates.

Should I get a HELOC just for the tax deduction?

No. The tax benefit alone rarely justifies borrowing. Most homeowners can't itemize, and even those who can only recover a portion of interest costs through the deduction. Choose a HELOC based on rate, flexibility, and your actual need for funds.

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Bottom Line

HELOC interest can be tax deductible—but only if you itemize, only if you use funds for home improvements, and only up to combined mortgage limits.

For most homeowners, the standard deduction is the better choice, making HELOC interest deduction theoretical rather than practical. And with tax rules scheduled to change after 2025, the landscape may shift again.

Our advice: Choose a HELOC based on rate, terms, and your actual financial needs. If the tax deduction applies, consider it a bonus—not a reason to borrow.

Disclaimer: This article provides general information about HELOC tax deductibility and should not be considered tax advice. Tax rules are complex and individual situations vary. Consult a qualified tax professional for advice specific to your circumstances.

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Related Articles:

• What Is a HELOC?
• HELOC for Home Improvement: Complete Guide
• HELOC for Debt Consolidation: Pros, Cons, and Alternatives
• HELOC Requirements: What You Need to Qualify