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 current law, 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.