On this page 6 sections
In short
- The rule: interest counts only on money used to buy, build or substantially improve the home securing the HELOC.
- The limit: mortgage interest is deductible on up to $750,000 of qualifying debt ($375,000 if married filing separately), first mortgage and HELOC combined.
- What changed in 2025: these rules were scheduled to end after 2025. P.L. 119-21 made them permanent.
- Not deductible: HELOC interest on money used for credit cards, a car, tuition or other non-home costs.
General information from IRS Publication 936 and the text of the 2025 tax law, not tax advice. Ask a tax professional about your own return.
The rule
IRS Publication 936 for 2025 says that, no matter when the debt was taken out, you can't deduct interest on a loan secured by your home to the extent the money wasn't used to buy, build or substantially improve that home. A HELOC is a loan secured by your home, so the same test applies. IRS Pub. 936 (2025)
If you used part of the line for a remodel and part to pay off cards, only the interest on the remodel portion can qualify. Keep records that show where the money went.
The $750,000 limit
Qualifying interest is deductible on the first $750,000 of home debt, or $375,000 if married filing separately. That cap covers your first mortgage and the HELOC together. Debt taken out before December 16, 2017, keeps the older $1 million limit ($500,000 if married filing separately). IRS Pub. 936 (2025)
The deduction only helps if you itemize. If your standard deduction is larger than your itemized deductions, the interest doesn't change your tax.
What the 2025 tax law changed
The 2017 tax law set the $750,000 limit and ended the deduction for home equity interest used for other purposes, but only through 2025. Many articles still say those rules expire and the old ones, including a deduction on up to $100,000 of home equity debt for any use, will return.
They won't. The 2025 tax law, H.R. 1 (P.L. 119-21), made both rules permanent. The AICPA's Journal of Accountancy summarizes it: the act "permanently extends" the $750,000 limit and "makes permanent the exclusion of interest on home-equity indebtedness." Journal of Accountancy
Examples
| How the HELOC money was used | Can the interest qualify? |
|---|---|
| Kitchen remodel or room addition on the home securing the HELOC | Yes, if total qualifying debt is within the limit |
| Buying the home that secures the HELOC | Yes, if total qualifying debt is within the limit |
| Paying off credit cards | No |
| A car, tuition or a vacation | No |
| Down payment on a different property | No. The debt has to be secured by the home it buys or improves |
Frequently asked questions
Is HELOC interest tax deductible in 2026?
Only when the money buys, builds or substantially improves the home that secures the HELOC, within the $750,000 limit. The 2025 tax law made those rules permanent.
Will the $100,000 home equity deduction come back?
No. It was suspended from 2018 through 2025, and the 2025 tax law made the suspension permanent.
Can I deduct HELOC interest if I used it to pay off credit cards?
No. Interest on HELOC money used for anything other than buying, building or substantially improving the home securing it isn't deductible as home mortgage interest.
Does the $750,000 limit include my first mortgage?
Yes. It covers all qualifying debt on your main home and a second home combined, $375,000 if married filing separately.
Questions about your own situation? Contact a licensed loan officer. It's optional, and your information is not sold to lead marketplaces.