{"id":45745,"date":"2024-07-17T11:26:11","date_gmt":"2024-07-17T18:26:11","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=45745"},"modified":"2024-07-17T11:26:11","modified_gmt":"2024-07-17T18:26:11","slug":"is-home-equity-loan-interest-tax-deductible","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/","title":{"rendered":"Is Home Equity Loan Interest Tax Deductible? (Simply Put)"},"content":{"rendered":"

In the past four years, home values in the U.S. have surged by 47%<\/a>. As a result, homeowners are collectively sitting on close to $33 trillion<\/a> in home equity \u2014 and many are taking advantage of this windfall through equity-backed loans. This begs the question: Is home equity loan interest tax deductible?<\/p>\n

Like so many things touched by the IRS, the agency\u2019s answer can sound complex or even ambiguous. In this brief post, we simplify and clarify the key rules. It all starts with an easier question: How are you spending the loan funds?<\/p>\n

\n\n\n\n\n

\n
\n
\n \"homelight\n <\/div>\n \n

How Much Is Your Home Worth Now?<\/h3>\n

Home values have rapidly increased in recent years. How much is your current home worth now? Get a ballpark estimate from HomeLight’s free Home Value Estimator.<\/p>\n \n

\n Get Estimate<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n
<\/div><\/p>\n

Is home equity loan interest tax deductible?<\/h2>\n

Simply put, taxpayers can deduct the interest on a home equity loan or home equity line of credit (HELOC) in most cases if they use the money to renovate or improve the property that backs the equity loan.<\/p>\n

There are additional rules and limitations on large or combined equity-backed loan amounts. But since the average equity loan taken out by U.S. homeowners is around $100,000,<\/a> and the average HELOC balance is about $42,000,<\/a> most Americans won\u2019t need to claw through the \u201climits for deductions on all residential debt\u201d spelled out in IRS Publication 936<\/a>.<\/p>\n

Nevertheless, we will share this overview note provided by the IRS:<\/p>\n

\u201cInterest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve<\/strong> the taxpayer\u2019s home that secures the loan. The loan must be secured by the taxpayer\u2019s main home or second home (qualified residence), and meet other requirements.\u201d<\/em><\/p>\n

In IRS lingo, this qualified interest you pay on the borrowed funds is classified as home acquisition debt<\/a>. These rules apply to money borrowed for tax years 2018 through 2025<\/a>. Later in this post, we\u2019ll provide a concise section addressing money borrowed before 2018 and after 2025. (Yes, the IRS has a tax code window for this, but we\u2019ll simplify that, too.)<\/p>\n

<\/div>\n

Does your home equity loan qualify?<\/h2>\n

Under this \u201cbuy, build, or substantially improve\u201d test, you could potentially deduct home equity loan or HELOC interest if the borrowed money is used for the following:<\/p>\n

    \n
  • Buy a primary or second home*<\/li>\n
  • Build a primary or second home<\/li>\n
  • Make home improvements to your primary or second home<\/li>\n<\/ul>\n

    *A qualified second home must still be a primary residence, such as a vacation home where you actually reside, not a rental or income property with tenants.<\/em><\/p>\n

    If you used the borrowed money for anything else, such as debt consolidation, buying a car, boat, or RV, or paying for your daughter\u2019s wedding, you cannot deduct the loan interest.<\/p>\n

    In summary, if you use the funds for a qualified renovation or repair on a qualified residence, you can deduct some or all of your home equity loan or home equity line of credit (HELOC) interest on your taxes. The test begins with the phrase \u201cbuy, build, or substantially improve\u201d and what percentage of the loan money was applied to this purpose.<\/p>\n

    Also, both you and your lender must intend that the loan be repaid, and the renovation work on your home must happen in the same calendar year that you borrowed the money.<\/p>\n","protected":false},"excerpt":{"rendered":"

    This post provides a clearer answer to the question: Is home equity loan interest tax deductible? We sift through the IRS jargon to keep it simple.<\/p>\n","protected":false},"author":298,"featured_media":45746,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[343,322],"tags":[],"class_list":["post-45745","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finances","category-logistics"],"acf":[],"yoast_head":"\nIs Home Equity Loan Interest Tax Deductible? (Simply Put)<\/title>\n<meta name=\"description\" content=\"This post provides a clearer answer to the question: Is home equity loan interest tax deductible? We sift through the IRS jargon to keep it simple.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is Home Equity Loan Interest Tax Deductible? (Simply Put)\" \/>\n<meta property=\"og:description\" content=\"This post provides a clearer answer to the question: Is home equity loan interest tax deductible? We sift through the IRS jargon to keep it simple.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/\" \/>\n<meta property=\"og:site_name\" content=\"HomeLight Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/gohomelight\/\" \/>\n<meta property=\"article:published_time\" content=\"2024-07-17T18:26:11+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hl-blog.homelight.com\/wp-content\/uploads\/2024\/07\/is-home-equity-loan-interest-tax-deductible.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Richard Haddad\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@gohomelight\" \/>\n<meta name=\"twitter:site\" content=\"@gohomelight\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Richard Haddad\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"7 minutes\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Is Home Equity Loan Interest Tax Deductible? (Simply Put)","description":"This post provides a clearer answer to the question: Is home equity loan interest tax deductible? We sift through the IRS jargon to keep it simple.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/","og_locale":"en_US","og_type":"article","og_title":"Is Home Equity Loan Interest Tax Deductible? (Simply Put)","og_description":"This post provides a clearer answer to the question: Is home equity loan interest tax deductible? We sift through the IRS jargon to keep it simple.","og_url":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/","og_site_name":"HomeLight Blog","article_publisher":"https:\/\/www.facebook.com\/gohomelight\/","article_published_time":"2024-07-17T18:26:11+00:00","og_image":[{"width":1000,"height":563,"url":"https:\/\/hl-blog.homelight.com\/wp-content\/uploads\/2024\/07\/is-home-equity-loan-interest-tax-deductible.png","type":"image\/png"}],"author":"Richard Haddad","twitter_card":"summary_large_image","twitter_creator":"@gohomelight","twitter_site":"@gohomelight","twitter_misc":{"Written by":"Richard Haddad","Est. reading time":"7 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":["Article","BlogPosting"],"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#article","isPartOf":{"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/"},"author":{"name":"Richard Haddad","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/7d7103b037dcb5e844946ec92b02a128"},"headline":"Is Home Equity Loan Interest Tax Deductible? (Simply Put)","datePublished":"2024-07-17T18:26:11+00:00","mainEntityOfPage":{"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/"},"wordCount":555,"publisher":{"@id":"https:\/\/www.homelight.com\/blog\/#organization"},"image":{"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#primaryimage"},"thumbnailUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2024\/07\/is-home-equity-loan-interest-tax-deductible.png","articleSection":["Finances & Tax Implications","Logistics"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/","url":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/","name":"Is Home Equity Loan Interest Tax Deductible? (Simply Put)","isPartOf":{"@id":"https:\/\/www.homelight.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#primaryimage"},"image":{"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#primaryimage"},"thumbnailUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2024\/07\/is-home-equity-loan-interest-tax-deductible.png","datePublished":"2024-07-17T18:26:11+00:00","description":"This post provides a clearer answer to the question: Is home equity loan interest tax deductible? We sift through the IRS jargon to keep it simple.","breadcrumb":{"@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#primaryimage","url":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2024\/07\/is-home-equity-loan-interest-tax-deductible.png","contentUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2024\/07\/is-home-equity-loan-interest-tax-deductible.png","width":1000,"height":563,"caption":"Source: (paulbr75\/ Pixabay)"},{"@type":"BreadcrumbList","@id":"https:\/\/www.homelight.com\/blog\/is-home-equity-loan-interest-tax-deductible\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.homelight.com\/blog\/"},{"@type":"ListItem","position":2,"name":"Is Home Equity Loan Interest Tax Deductible? (Simply Put)"}]},{"@type":"WebSite","@id":"https:\/\/www.homelight.com\/blog\/#website","url":"https:\/\/www.homelight.com\/blog\/","name":"HomeLight Blog","description":"Real Estate Advice from America's Top Agents","publisher":{"@id":"https:\/\/www.homelight.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.homelight.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.homelight.com\/blog\/#organization","name":"HomeLight","url":"https:\/\/www.homelight.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2017\/11\/logo-hr-color.png","contentUrl":"https:\/\/www.homelight.com\/blog\/wp-content\/uploads\/2017\/11\/logo-hr-color.png","width":1348,"height":262,"caption":"HomeLight"},"image":{"@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/gohomelight\/","https:\/\/x.com\/gohomelight","https:\/\/www.linkedin.com\/company\/homelight\/","https:\/\/www.youtube.com\/channel\/UCimugR9XF17-OZ7B9fNnxWw","https:\/\/en.wikipedia.org\/wiki\/HomeLight"],"description":"Everything you need to know to sell your house faster and for more money. Articles, guides, and advice from top agents all over the U.S.","email":"support@homelight.com","telephone":"(888) 688-0350","legalName":"HomeLight","foundingDate":"2012-01-01","numberOfEmployees":{"@type":"QuantitativeValue","minValue":"201","maxValue":"500"}},{"@type":"Person","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/7d7103b037dcb5e844946ec92b02a128","name":"Richard Haddad","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.homelight.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/fbb89d16f303ea1de47fd69852400830b4a663ea6dbb4eecafbea5c1403da721?s=96&d=blank&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/fbb89d16f303ea1de47fd69852400830b4a663ea6dbb4eecafbea5c1403da721?s=96&d=blank&r=g","caption":"Richard Haddad"},"description":"Richard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company\u2019s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.","sameAs":["https:\/\/www.homelight.com","https:\/\/www.linkedin.com\/in\/richard-w-haddad"],"url":"https:\/\/www.homelight.com\/blog\/author\/richardhaddad\/"}]}},"_links":{"self":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/posts\/45745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/users\/298"}],"replies":[{"embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/comments?post=45745"}],"version-history":[{"count":0,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/posts\/45745\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/media\/45746"}],"wp:attachment":[{"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/media?parent=45745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/categories?post=45745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.homelight.com\/blog\/wp-json\/wp\/v2\/tags?post=45745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}