🏡 Is HELOC Interest Still Tax Deductible? Yes — But Only If You Use It the Right Way

Thinking of using a HELOC to fund college or buy a car? Here’s what the IRS says about whether you can deduct the interest.

Home equity lines of credit (HELOCs) are a popular way for homeowners to access cash—often at lower interest rates than personal loans or credit cards. But while tapping your home’s equity may be easy, the tax treatment of the interest you pay on that debt is anything but simple.

So, is HELOC interest tax deductible?The answer is yes—but only under specific circumstances. If you're planning to use your HELOC to pay for college tuition, buy a new car, or take a dream vacation, you won’t get a tax break. But if you’re using the funds to buy, build, or substantially improve your home, then the interest may still be deductible.

Let’s break down what counts—and what doesn’t.

✅ When HELOC Interest Is Deductible

Under current IRS rules (as clarified by the 2017 Tax Cuts and Jobs Act), HELOC interest may be deductible if:

• The loan is secured by your primary or secondary residence, and

• The funds are used to buy, build, or substantially improve that same home.

This means:

• Renovating your kitchen ✔️

• Finishing your basement ✔️

• Building an addition or replacing your roof ✔️

• Buying a new property and using the HELOC as part of the financing ✔️

As long as the debt is secured by the property being improved or purchased, the interest may qualify as home acquisition debt and be deductible—up to the mortgage interest limits.

❌ When HELOC Interest Is Not Deductible

The IRS is clear: using HELOC funds for personal expenses disqualifies the interest from being deductible. That includes:

• Paying for college tuition ❌

• Buying a car or RV ❌

• Consolidating credit card debt ❌

• Taking a vacation or paying medical bills ❌

Even if the loan is secured by your home, if the proceeds are used for non-home purposes, the interest is not deductible.

📉 How Much Can You Deduct?

HELOC interest falls under the broader cap for mortgage interest deductions, which is currently limited to interest on up to $750,000 of qualified home acquisition debt (or $1 million for loans originating before 2018). This includes your primary mortgage plus any qualifying HELOC or home equity loan used to buy, build, or improve.

🧾 Example: Deductible vs. Non-Deductible HELOC Use

Scenario 1 – DeductibleYou borrow $60,000 through a HELOC to renovate your kitchen and bathrooms. The loan is secured by your home, and the improvements increase your home’s value.✅ Result: The interest is tax deductible.

Scenario 2 – Not DeductibleYou borrow $60,000 through a HELOC to pay your child’s college tuition.❌ Result: The interest is not deductible, even if the loan is secured by your home.

🧠 Final Thoughts

The HELOC can be a powerful financial tool—but only if used strategically. The tax deductibility of interest depends entirely on how you use the funds. Before you draw on your home’s equity, make sure you understand both the financial and tax implications.

📣 Need Help Structuring Your Debt for Tax Efficiency?

Before you pull money from your home, let’s make sure the strategy aligns with your financial and tax goals. A quick consultation could help you avoid a costly mistake—or uncover a smart deduction.

📞 Schedule a tax planning call today.Let’s keep more of your money working for you.

👉 Book now