When Home Equity Interest May Qualify for a Tax Deduction

Reviewed October 2026. A home equity loan or home equity line of credit (HELOC) does not make its interest deductible just because the loan is secured by a home. The use of the borrowed funds matters. The IRS home-equity interest FAQ says interest on a loan secured by a main or second home may be deductible when the funds are used to buy, build or substantially improve the home securing the loan, subject to other requirements and dollar limits. Interest on the same debt used for personal living expenses, such as paying credit-card bills, is not deductible under that rule.

Separate the loan decision from the tax question

Before borrowing, identify the property securing the loan, the planned use of the proceeds and the costs of the project. Keep your loan and project records available for the tax professional who prepares or reviews your return. The IRS’s Publication 936, Home Mortgage Interest Deduction explains the broader rules and limits; check the edition for the tax year you are filing. A tax professional can evaluate your particular facts, including whether you itemize deductions and how other mortgage debt affects any limit.

For the borrowing decision, compare the proposed rate, payment, fees, repayment period and the risk of pledging your home. NorthStar Funding’s loan-options overview offers general planning questions. Tax treatment is separate from a lender’s approval or terms. This page is general education, not tax advice, a deduction guarantee or a loan commitment.