Is home equity loan interest tax deductible in 2026? What homeowners need to know.

If you need cash, a home equity loan can give you access to money so you don’t have to resort to expensive credit card debt or personal loans.

Another perk of home equity loans is the potential to write off the interest and lower your tax bill. That said, you must meet a few rules and requirements to be eligible for this tax deduction.

Generally, yes. But in some cases, deducting the interest paid on your home equity loan (HEL) depends on how you use the money. According to the IRS, home equity loan interest can be tax deductible as long as you use the funds to “buy, build, or substantially improve” your home. You won’t qualify for a tax deduction if you use the loan funds for other purposes, like paying off student loans or medical debt.

Eligibility doesn’t just hinge on how taxpayers use the funds — it also depends on when you took out the loan and the total amount of your home debt.

Learn more: Tax deduction vs. tax credit — What’s the difference?

The rules for home equity loan interest tax deductions changed after the Tax Cuts and Jobs Act (TCJA) took effect in late 2017. Here are the current rules:

For HELs taken out after Dec. 15, 2017: You’re allowed to deduct interest paid on up to $750,000 of home loans. If you’re married and filing separately, the limit goes down to $375,000. Remember that this cap applies to the total of all residential debt, including your first mortgage, home equity loans, and home equity lines of credit (HELOCs). Again, you can only deduct the interest on your HEL or HELOC if you used the money to “buy, build, or substantially improve” the property.
For HELs taken out on or before Dec. 15, 2017: You can claim tax deductions on interest paid on up to $1 million of qualified residential debt, regardless of how you use the funds. If you’re married and filing separately, the limit is $500,000.

Note that your home equity loan, whether issued before or after TCJA took effect, must be secured by your first or second home to be eligible for interest tax deductions.

Read more: Are home improvements tax deductible?

Let’s say you bought a house in 2021 and currently have a mortgage balance of $720,000. Then, you took out a $75,000 home equity loan in 2023 to make significant home improvements. Since your combined total mortgage balance ($795,000) exceeds the $750,000 limit set by the TCJA, you can’t claim all interest paid on your home loans. However, you may deduct interest paid on the first $750,000.

It’s important to note that the TCJA mortgage interest deduction rules expired on Dec. 31, 2025. That means you’re good to file your 2025 taxes using TCJA rules for HEL interest deductibility, but for tax years 2026 and beyond, the rules revert to those in place before the TCJA. Those rules allow joint taxpayers to deduct interest on up to $1 million in mortgage debt. Single filers can deduct up to half of that: $500,000.

Dig deeper: Mortgage interest tax deduction — How it works and when it makes sense

Here’s how to claim your home equity loan interest tax deduction and lower your tax bill to Uncle Sam.

Not every homeowner with a home equity loan is eligible to write off the interest they paid on it. The total amount of your mortgage debt, when you took out the home equity loan, and how you used the funds can all affect your eligibility. To avoid any issues when tax season comes, review the TCJA rules above to see if your loan qualifies for a deduction. Contact a tax professional if you have any questions or concerns.

You must itemize your deductions to qualify for a home equity loan interest tax deduction instead of opting for the standard tax deduction. Here are the standard deductions for 2025 and 2026.

Itemizing doesn’t always make financial sense, especially if the total of your itemized deductions is lower than the standard deduction for your filing status. However, if your itemized deductions are well above your standard deduction amount, it would likely make financial sense to itemize and benefit from the tax breaks on home equity loan interest.

Read more: How to decide between a standard and itemized tax deduction

Gather documents and receipts

Before filing an itemized return to claim the home equity loan interest tax deduction, make sure you have these documents handy:

IRS Form 1098: This form details the mortgage interest you’ve paid during the tax year. You should receive this form from your lender before the tax season if you paid mortgage interest of $600 or more.
IRS Form 1040: You’ll use this form to itemize your deductions. By submitting this document to the IRS, you’re foregoing the standard deduction.
Relevant receipts or bank statements: Have your receipts and bank statements handy to show how you used the funds from the home equity loan. You must use the money to build, buy, or make significant upgrades to your home to qualify for the deduction.

Learn more: A list of tax deductions for homeowners

The short answer is yes, but with some caveats. First, the home equity loan must be on your primary or secondary residence. Next, the IRS says you must use the HEL funds to “buy, build, or sustainably improve” your home.

Finally, the amount of interest you can deduct depends on when you took out the HEL. If you took out your HEL before Dec. 15, 2017, you can deduct up to $750,000 in HEL interest depending on your filing status. For HELs taken out before that date, you can deduct up to $1 million in HEL interest based on your filing status.

You can only deduct the interest on a home equity loan, not the loan balance itself or any of the fees associated with originating the loan. Even then, you can only deduct the interest if you use the funds to purchase, build, or make sustainable improvements to your home. You’ll also have to skip the standard deduction and itemize to claim this deduction, which may make deducting the interest a wash if the standard deduction ends up being higher than your itemized deductions.

For the 2025 tax year, with a filing deadline of April 15, 2026, you can still write off home equity loan interest based on the limits set by the Tax Cuts and Jobs Act of 2017. How much you can deduct depends on when you took out your HEL, how you used the funds, and your filing status. Starting with the 2026 tax year, however, the rules on mortgage interest deductions revert to those in place before that legislation was passed. Look for guidance published throughout 2026 on what those new limits look like and don’t hesitate to seek out a tax professional to help guide you through the changes.