Is Home Equity Loan Interest Tax Deductible?

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Home equity loan interest is only deductible if you use the borrowed money to “buy, build or substantially improve” the home that secures the loan, under current law. Prior to 2018, it was possible to deduct interest on a home equity loan regardless of how you used the payout, but that’s no longer the case.

Learn how to access this tax deduction and what the trade-offs are before deciding whether it’s right for you. We’ll cover all that as we answer the question, “Is home equity loan interest tax deductible?”

Key takeaways

Borrowers who use their home equity loan funds for buying, constructing or renovating their property may qualify for interest write-offs at tax time.
Only the interest on up to $750,000 (for couples filing together or single taxpayers) counts.
Claiming this tax benefit requires that you itemize your taxes.

Can I deduct the interest on my home equity loan?

You can deduct the interest on your home equity loan as long as it qualifies under IRS rules:

The home equity loan closed after 2018
You’re only including interest up to the first $750,000 (or $375,000 if married or filing separately)
The home equity loan payout was used to purchase, build or improve the home that secures the loan

These rules are set out in the Tax Cut and Jobs Act (TCJA), which went into effect in 2018 and were made permanent when President Trump signed the One Big Beautiful Bill Act (OBBBA) into law in July 2025.

Other mortgage loans covered under the same rules

The home mortgage interest deduction also covers home equity lines of credit (HELOCs) and mortgages (including refinances) on primary and second homes, in addition to home equity loans.

Should I deduct the interest on my home equity loan?

You should only consider deducting the interest on your home equity loan if your total itemized deductions exceed the standard deduction amount.

That’s because, in order to benefit from the home mortgage interest deduction, you’ll need to itemize your deductions rather than take the standard deduction. For most homeowners, however, itemizing doesn’t provide a greater tax benefit.

The standard deduction amounts in 2025 are:

$15,750 for individuals and married couples filing separately
$31,500 for married couples filing jointly
$23,625 for unmarried heads of households

The standard deduction amounts for 2026 are:

$16,100 for individuals and married couples filing separately
$32,200 for married couples filing jointly
$24,150 for unmarried heads of households

Example: How deducting home equity loan interest works

Let’s say you purchased a home in 2020 — then, in 2023, you took out a home equity loan for $100,000 to cover renovations. All of the interest you paid on that home equity loan would be tax-deductible.

How to claim the home equity loan interest deduction (for tax year 2025)

Identify how much interest you paid on your home equity loan. You should receive a Form 1098 from your current loan servicer at the end of the year. The amount listed in Box 1 shows the amount of interest you paid.
Gather your home equity loan paperwork. You’ll receive a closing disclosure three business days prior to closing, which provides a breakdown of all the costs paid.
Document your home improvement expenses. Keep your invoices, receipts and work orders to prove that you used your home equity loan funds for improvements.
Itemize your deductions. When tax time comes around, you’ll have to itemize your deductions to claim the home equity loan interest deduction.

Other tax breaks for homeowners

You may be eligible for a variety of tax breaks for buying a home. Below are some of the most common ones:

Mortgage interest on your first home loan. If you currently have a first mortgage, you may deduct the mortgage interest you paid in addition to your home equity loan interest. However, there’s one exception: If you tapped your equity with a cash-out refinance by borrowing more than you owed on your previous mortgage, you can’t deduct the interest for the higher loan amount unless it was used for home improvements.
Mortgage points. A mortgage point — more commonly known as a “discount point” — is money paid upfront in exchange for a lower interest rate. In most cases, mortgage points are deducted over the life of the loan, but you can write them off in the year you pay them if the following conditions are met:
- The loan is secured by your primary residence or second home
- The points didn’t cost more than what’s typically charged in your area
- The points weren’t paid to replace other closing costs, like title or appraisal fees
- The points were figured as a percentage of your principal balance and are clearly shown as discount points on your settlement statement

State and local taxes. Tax laws allow you to deduct state and local property taxes of up to $10,000 for single taxpayers and married couples that file jointly. The deduction limit drops to $5,000 for married couples who file separate returns. As with point deductions, you’ll have to itemize to get a tax break with property taxes.
Capital gains on the sale of your home. Capital gains tax laws allow you to keep a portion of the profits tax-free when you sell your home. Married couples may qualify to keep up to $500,000 of their sale-related gains tax-free; for individual filers, the number is $250,000. If you lived in the home as your primary residence for two of the last five years before it was sold, you’d be eligible for this tax benefit.
Home office deduction. If some of your home’s square footage was used for business purposes, you may qualify for this deduction — though you will need to prove the home address is the same as your business location. You can take the deduction based on a percentage of how much of your home is used for business, or based on a flat $5-per-square-foot rate for up to 300 square feet. One caveat: You can’t claim the deduction if you work remotely.

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Can I deduct the interest on my home equity loan?
Should I deduct the interest on my home equity loan?
Example: How deducting home equity loan interest works
How to claim the home equity loan interest deduction (for tax year 2025)
Other tax breaks for homeowners

Loan Amount	APR	Payment
$25,000.00	6.49%	$157.85
$50,000.00	6.49%	$315.71
$100,000.00	6.49%	$631.41