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Tax tips for using a HELOC

In the past, home equity loan interest was generally tax deductible no matter how the borrowed money was used—whether you were fixing up your house, paying off debt or otherwise.

But since the Tax Cuts and Jobs Act of 2017, homeowners can only deduct interest from home equity loans and home equity lines of credit (HELOCs) if the loans are being used to fund certain types of projects.

Under the new legislation, in effect through 2025, your HELOC interest is eligible for a tax deduction only if the proceeds are used to “substantially improve” a qualified residence. That means the project must add to your home’s value, prolong its useful life or adapt it for new uses.

While the law seems complicated, here are some suggested guidelines to determine which projects may be eligible for interest deductions under the new rules.

Deduction Do’s

Projects that add value

Improvements that increase longevity

New use modifications

Deduction Don’ts

Home maintenance

Minor repairs


It’s nice to change your house in a way that suits your personal preferences. However, you’ll only get a tax deduction when you use HELOC funds to substantially improve your home as described above. No matter how you use your HELOC funds, remember there are also dollar limits on how much of the loan qualifies for interest deductions, depending on your tax filing status and the amount of certain of your other mortgage and home equity debt. That’s why it always pays to do your research. To find out more, talk to your tax advisor and visit IRS.gov.

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The material provided on this website is for informational use only and is not intended for financial, tax or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional and tax advisor when making decisions regarding your financial situation.

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Bank of America and its affiliates do not provide legal, tax or, accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.