The 'Buy, Build, or Improve' Rule
Under rules that took effect with the Tax Cuts and Jobs Act, home equity debt interest is deductible only if the loan proceeds go toward acquiring or substantially improving the home that secures the loan — a kitchen renovation qualifies, paying off a car loan doesn't.
The Combined Mortgage Debt Cap
Total mortgage debt (your original mortgage plus any home equity borrowing) eligible for interest deduction is capped at $750,000 for loans originated after December 15, 2017 ($1 million for older loans), and you must itemize deductions to claim it.
Keep Documentation
If you use equity funds for home improvements, keep receipts and records tying the loan proceeds directly to the project — this documentation matters if your deduction is ever questioned.
When Itemizing Doesn't Make Sense
With the 2026 standard deduction at $16,100 (single) or $32,200 (married filing jointly), many homeowners with modest mortgage interest and property tax find the standard deduction still beats itemizing, making this deduction moot for them.
This page is for educational purposes and isn't personalized financial or tax advice. Figures, rates, and program details change frequently — confirm current terms directly with lenders, tax professionals, or the IRS before acting.