Core Insights - Home equity lines of credit (HELOCs) allow homeowners to borrow against their home equity, with interest that can accumulate quickly [1] - The tax deductibility of HELOC interest depends on the use of the funds and current IRS rules, especially as provisions from the Tax Cuts and Jobs Act (TCJA) near expiration [1][10] Tax Deductibility of HELOC Interest - HELOC interest is generally tax deductible if the funds are used to "buy, build, or substantially improve" the home [2] - If the funds are used for other purposes, such as paying off credit card debt, the interest is not deductible [2] - The TCJA changed the rules for HELOC interest deductions, allowing deductions on interest paid on up to $1 million of home loan debt for HELOCs taken out before December 15, 2017 [3] - For HELOCs taken out after December 15, 2017, the deductible interest is limited to loans of up to $750,000, provided the funds are used for qualified purposes [4] Example Scenario - A homeowner with a $700,000 mortgage and a $100,000 HELOC for home improvements would have a total mortgage balance of $800,000, but can only deduct interest on the first $750,000 [5] Claiming the Deduction - Homeowners must check if their HELOC qualifies for a tax deduction based on total home debt, usage of funds, and the timing of the HELOC [7] - Taxpayers must itemize deductions to claim the HELOC interest deduction; it cannot be claimed if opting for the standard deduction [8][11] - Proper documentation is essential for accurately reporting the HELOC deduction and for potential IRS audits [9][12] Future Considerations - The deductibility of HELOC interest may change in 2026, and it is advisable to verify current IRS guidance before filing [10]