HELOC interest can be tax deductible — but only under specific conditions that changed significantly with the 2017 Tax Cuts and Jobs Act (TCJA). Many homeowners assume all HELOC interest is deductible. It isn’t. Here’s exactly what the IRS allows in 2026.
The Core Rule: It Depends on How You Use the Money
The IRS allows you to deduct HELOC interest only if the funds were used to buy, build, or substantially improve the home that secures the loan.
Deductible uses:
- Adding a room or extension to your home
- Kitchen or bathroom renovation
- New roof, HVAC system, or foundation repair
- Building an accessory dwelling unit (ADU) on your property
- Making the home more energy-efficient
Non-deductible uses:
- Paying off credit card debt or student loans
- Buying a car, boat, or other personal property
- Vacation or living expenses
- Investing in stocks or business ventures
- Tuition or medical bills
The Loan Limit Cap
Even when used for home improvement, your deduction has a ceiling. Under the TCJA rules (still in effect for 2026), you can only deduct interest on the first $750,000 of combined home acquisition debt — meaning your primary mortgage plus your HELOC combined.
Example — under the cap: Mortgage $600,000 + HELOC $100,000 = $700,000 — fully deductible.
Example — over the cap: Mortgage $700,000 + HELOC $100,000 = $800,000 — $50,000 exceeds the cap, so a portion of HELOC interest is non-deductible.
You Must Itemize to Claim the Deduction
HELOC interest is deducted on Schedule A as mortgage interest. For 2026, the standard deduction is approximately $14,600 for single filers and $29,200 for married filing jointly. If your total itemized deductions don’t exceed these amounts, you get no benefit from HELOC interest deductibility.
Documentation You Need
- Form 1098 from your lender showing interest paid
- Receipts and invoices proving funds were spent on home improvement
- Contractor agreements or permits if applicable
- Bank statements tracing HELOC draws to home improvement payments
The Bottom Line
HELOC interest is deductible in 2026 if: (1) you used the funds for qualifying home improvements, (2) your combined mortgage + HELOC debt is under $750,000, and (3) you itemize deductions on Schedule A. In all other cases, it is not deductible.
Always consult a tax professional for your specific situation. Use our free HELOC calculator to estimate your payments and understand the full cost of borrowing.