Article: 50520

Overview 

A Home Equity Line of Credit (HELOC) may allow you to deduct the interest paid, but only under certain conditions. The IRS has specific rules on when this interest qualifies as a tax deduction. 

IRS Rule for HELOC Interest Deduction 

According to IRS Publication 936: 

• Interest on a home equity loan or line of credit is deductible only if: 

• The borrowed funds are used to buy, build, or improve the home that secures the loan. 

• The loan is secured by your main home or second home (a qualified residence). 

• Other IRS requirements are met. 

Note: Interest is not deductible if HELOC is used for personal expenses such as: 

• Paying off credit cards 

• Buying a car 

• Covering everyday living expenses 

How to Report 

1. Go to the Itemized Deductions – Interest Paid section. 

2. Add your mortgage interest information, including HELOC interest if it qualifies. 

3. The system will automatically determine whether itemizing provides a greater benefit than taking the standard deduction. 

Example 

• Deductible: You use a $30,000 HELOC secured by your main home to remodel your kitchen. The interest may qualify as deductible. 

• Not Deductible: You use a $20,000 HELOC to pay off personal credit card debt. The interest does not qualify. 

Additional Resources 

For official IRS guidance, see: IRS Publication 936 – Home Mortgage Interest Deduction