What Home Equity Loan Interest Is Tax Deductible? All of the interest on your home equity loan is deductible as long as your total mortgage debt is $750,000 (or $1 million) or less, you itemize your deductions, and, according to the IRS, you use the loan to “buy, build or substantially improve” your home.

Is home equity interest expense deductible for individual taxpayers?

Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan. The loan must be secured by the taxpayer’s main home or second home (qualified residence), and meet other requirements.

Is the interest on a home equity line of credit deductible?

The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

Is the interest paid on a HELOC tax deductible?

(See Home Equity Loan vs. HELOC .) Interest paid on either loan, like the interest on your first mortgage, is sometimes tax-deductible. Since the Dec. 2017 tax law changes, whether interest on any kind of HELOC or home equity loan is tax deductible depends on how you are spending the loan funds.

Is there a loophole in the home equity loan deduction?

The Internal Revenue Service ( IRS ), however, has left a loophole in the current tax law that would permit some homeowners to continue benefiting from the home equity loan interest deduction. 4 

Are there any tax breaks for home equity loan interest?

The 2017 Tax Cuts and Jobs Act introduced a slew of new tax breaks while doing away with others, one of which was supposed to affect home equity loan interest. Much of that deduction has effectively been eliminated, at least through the end of 2025.