The IRS rule: how you spend the money decides it
Interest on a HELOC or home equity loan is deductible only if the borrowed money is used to buy, build or substantially improve the home that secures the loan; the IRS says this applies no matter when the debt was taken on.[1] An improvement counts as substantial if it adds to the home's value, prolongs its useful life or adapts it to new uses; repairs that only keep the home in good condition, such as repainting, do not.[1]
| What the HELOC money paid for | Deductible as home mortgage interest? |
|---|---|
| Kitchen or bathroom remodel, addition, new roof on that home | Yes, as qualified debt, within the limit |
| Buying or building that home | Yes, within the limit |
| Repainting or routine repairs alone | No: not a substantial improvement |
| Paying off credit cards or a car loan | No |
| Tuition, a wedding, a vacation | No |
| Improving a different property | Not as interest on this home; ask a tax professional |
Points paid on a home equity line follow the same test: if the proceeds are not used to buy, build or substantially improve the home, the points are not deductible either.[1] Keep receipts that show where the money went.
The $750,000 limit, now permanent
You can deduct interest on the first $750,000 of home mortgage debt, or $375,000 if married filing separately; debt taken on before December 16, 2017 keeps the older $1 million ($500,000) limit.[1] These limits were due to expire after 2025, but Public Law 119-21 (July 4, 2025) removed the end date from both the $750,000 limit and the rule that disallows home-equity interest not used on the home, starting with 2026 returns.[3] The IRS's draft 2026 Publication 936 carries both rules forward.[2]
When a mortgage plus qualifying HELOC debt goes above the limit, only a fraction of the interest counts. With a $700,000 mortgage and a $150,000 HELOC spent on a renovation, qualifying debt is $850,000, so 88.2% of the interest ($50,074 of $56,750) is deductible.
Itemizing: the step most people miss
Deductible interest only lowers your tax if your itemized deductions add up to more than the standard deduction. For 2026 the standard deduction is $32,200 for married couples filing jointly, $24,150 for heads of household and $16,100 for single filers.[4]
| Spent on a remodel | Spent paying off other debt | |
|---|---|---|
| Mortgage interest (one year) | $12,000 | $12,000 |
| Deductible HELOC interest | $6,000 | $0 |
| Other itemized deductions | $15,000 | $15,000 |
| Total itemized | $33,000 | $27,000 |
| Standard deduction | $32,200 | $32,200 |
| Tax saved at 22% | $176 | $0 |
Even when every dollar qualifies, the saving here is $176 a year, because itemizing beats the standard deduction by only $800. Do not count on a large tax break to make a HELOC affordable; check the payment itself with the HELOC payment calculator.
Worked example
- A married couple owes $320,000 at 3.75% and draws $80,000 at 7.50% for a kitchen remodel.
- Qualifying debt: $320,000 + $80,000 = $400,000, under $750,000, so all interest counts: $12,000 + $6,000 = $18,000.
- With $15,000 of other deductions they could itemize $33,000, versus a $32,200 standard deduction.
- The difference, $800, times their 22% rate saves about $176 of federal tax.
Mortgage insurance is deductible againFor tax year 2026 the itemized deduction for qualified mortgage insurance premiums is reinstated, with the same income phase-out as before: it shrinks above $100,000 of AGI and disappears above $109,000 ($50,000 and $54,500 if married filing separately).[2][3]
Before you claim it
The figures here are estimates for planning, not tax advice. Interest on a HELOC secured by a rental or other property follows different rules; see HELOC on investment property. If the line will pay for a project, the home improvement loan calculator compares it with other ways to pay, and the HELOC refinance page covers what happens when the draw period ends. A tax professional can confirm how your own return treats the interest.
Frequently asked questions
Is HELOC interest tax deductible in 2026?
Is home equity loan interest deductible if used to pay off debt?
What counts as a substantial improvement?
Work that adds to the home's value, prolongs its useful life or adapts it to new uses, such as a remodel, an addition or a new roof. Repairs that only maintain the home, like repainting, do not count.[1]
Do I have to itemize to deduct HELOC interest?
Yes. The interest is an itemized deduction, so it only helps if your itemized total beats the 2026 standard deduction of $32,200 (joint), $24,150 (head of household) or $16,100 (single).[4]