The information provided in this blog is for educational and informational purposes only and should not be considered financial, legal, or investment advice. MIDFLORIDA Credit Union does not provide personalized financial planning services through this content. Please consult with a qualified financial advisor or other professional for advice tailored to your individual circumstances.
Many Florida homeowners wonder if they can deduct interest paid on a home equity loan. The answer depends on how the loan proceeds are used—and whether they meet Internal Revenue Service (IRS) criteria for qualified residence interest. While MIDFLORIDA Credit Union doesn't provide tax advice, this article offers a high-level overview of current rules to help you ask the right questions of a qualified tax advisor during tax season.
Apply for a home equity loan with MIDFLORIDA Credit Union.
What the IRS allows for home equity loan deductions
Under current federal law, home equity loan interest may be deductible if the funds are used to buy, build, or substantially improve the home that secures the loan.
Additionally:
- Previous "any purpose" deductibility eliminated
- $750,000 combined debt limit for married filing jointly
- $375,000 limit for married filing separately
- Focus on actual fund usage, not loan type
These rules apply to primary and secondary residences alike. The key factor is how the borrowed money is used—not just the fact that it’s a home equity loan. To potentially qualify for this deduction, homeowners must also itemize deductions on their federal tax return and stay within the total loan limit established by the IRS.
Common qualifying home improvements
The IRS considers substantial improvements as:
- Modifications that add value to your home
- Prolong your home’s useful life,
- Adapt the home to new uses
These improvements must be permanent additions or modifications rather than routine maintenance or repairs that merely maintain the property's current condition.
Qualifying home improvements:
- Room additions and expansions
- Kitchen and bathroom renovations
- New roofing and HVAC systems
- Flooring replacement throughout home
- Swimming pools and permanent decks
- Accessibility modifications
- Energy-efficient upgrades
- Hurricane shutters and storm protection
Swimming pools, decks, and landscaping projects may also qualify when they add permanent value to the property and integrate with the home's overall structure.
When home equity interest is not deductible
Home equity loan interest becomes non-deductible when proceeds fund purposes unrelated to home acquisition or improvement.
Non-qualifying loan uses:
- Debt consolidation or credit card payoffs
- Education expenses and tuition
- Business investments or startup costs
- Vehicle purchases
- Vacation or personal expenses
- Investment property improvements
- Stock market investments
- Emergency fund establishment
What about investment properties?
Investment property improvements funded through home equity loans on your primary residence also fail to qualify for deductible interest treatment. The improvement must occur on the same property that secures the loan to maintain tax deductibility status under current regulations. Understanding these limitations helps homeowners make strategic decisions about financing sources for different needs. MIDFLORIDA's lending professionals can discuss alternative financing options for non-qualifying purposes.
Document requirements for claiming deductions
Claiming home equity loan interest deductions requires maintaining comprehensive records of how loan proceeds were used and what improvements were completed. The IRS may request detailed documentation during audits, making proper record-keeping essential for defending claimed deductions.
Required documentation:
- Loan agreements showing disbursement details
- Contractor invoices and material receipts
- Building permits when applicable
- Before and after photographs
- Bank records showing direct payments
- Project completion certificates
- Professional installation documentation
Bank records showing direct payment from loan proceeds to contractors or material suppliers strengthen documentation packages.
Understanding itemized deductions and home equity interest
To deduct interest on a home equity loan, homeowners must typically itemize their deductions using Schedule A of their federal tax return. This means the total of all itemized deductions—such as mortgage interest, charitable donations, and certain medical expenses—must exceed the standard deduction threshold for your filing status. As of 2025, the IRS standard deduction amounts are:
| Filing Status | 2023 Standard Deduction | Itemizing Threshold |
| Single | $13,850 | Must exceed this amount |
| Married Filing Jointly | $27,700 | Must exceed this amount |
| Married Filing Separately | $13,850 | Must exceed this amount |
| Head of Household | $20,800 | Must exceed this amount |
If your itemized deductions, including any qualifying home equity interest, don’t exceed these figures, you likely won’t see additional tax benefit from itemizing.
Common itemized deductions include:
- Mortgage and home equity loan interest (when used to improve the home)
- State and local taxes (SALT), capped at $10,000
- Charitable contributions Certain medical expenses (over 7.5% of adjusted gross income)
- Investment interest expenses
While we don’t offer tax advice, we encourage our members to track these figures closely when exploring home equity borrowing.
Florida’s unique tax environment
One advantage for Florida homeowners is the absence of a state income tax. This simplifies the tax picture—any deduction benefits apply at the federal level only.
That means:
- There are no state tax limits reducing the benefit of federal deductions
- All allowable home equity interest deductions apply in full (subject to federal law)
This can make itemizing deductions more appealing for Florida residents compared to those in states with complex tax structures. It also simplifies your overall tax planning.
When to consult a tax professional
Certain financial situations may require more in-depth guidance. You should consider consulting a qualified tax advisor if any of the following apply:
- You own multiple properties You use part of your home for business or rental income
- You hold a significant investment portfolio
- You’re subject to the alternative minimum tax (AMT)
Tax professionals can help you understand how home equity interest deductions may interact with depreciation schedules or other strategies. MIDFLORIDA can coordinate with your advisor to help ensure your loan supports your broader financial goals.
Keeping up with evolving tax laws
Current home equity interest deduction rules are part of the Tax Cuts and Jobs Act (TCJA), which is scheduled to end after 2025. At that time, Congress may:
- Revert to previous deduction rules
- Adjust loan amount limits
- Change how qualifying home improvements are defined
Planning large projects or major borrowing before potential changes may help you lock in current benefits. MIDFLORIDA stays up to date on major policy shifts and shares timely updates to help our members make informed decisions.
Maximizing your potential tax benefit
Here are a few strategies to help Florida homeowners potentially make the most of home equity interest deductions:
- Consolidate home improvement projects into a single tax year
- Coordinate loan timing with large deductible expenses
- Track your expenses and keep documentation organized
- Plan around deduction thresholds to ensure itemizing is worthwhile
With MIDFLORIDA, you gain a lender who understands the Florida landscape. We’ll work closely with you and your tax professional to ensure your home equity solution is both financially smart and tax-aware.
FAQs: Deducting home equity interest
Q: Is home equity loan interest tax-deductible?
A: Yes, but only when loan proceeds are used to buy, build, or substantially improve the home that secures the loan. The Tax Cuts and Jobs Act of 2017 eliminated deductions for home equity debt used for other purposes like debt consolidation or personal expenses.
Q: What home improvements qualify for tax-deductible interest?
A: Substantial improvements that add value, prolong useful life, or adapt the home to new uses qualify. Examples include kitchen renovations, room additions, new roofing, HVAC systems, and accessibility modifications. Routine maintenance and repairs don't qualify.
Q: What's the maximum loan amount for tax-deductible interest?
A: You can deduct interest on up to $750,000 in combined qualified residence debt (mortgage plus home equity loans) for married filing jointly, or $375,000 for married filing separately. This applies to loans originated after December 15, 2017.
Q: Do I need to itemize deductions to claim home equity loan interest?
A: Yes. You must itemize deductions on Schedule A rather than taking the standard deduction. For 2025, your total itemized deductions must exceed $30,000 (married filing jointly) or $15,000 (single) to provide tax benefits.
Making informed decisions about home equity and tax planning
Understanding how tax laws impact home equity loan interest can help you make smarter financial choices—especially when planning major home improvements. While general guidelines provide a helpful foundation, your actual tax benefits depend on your unique situation, including how the loan is used and whether you itemize deductions. That’s why partnering with a trusted Florida lender matters. At MIDFLORIDA, we combine local expertise with home equity lending solutions tailored to your goals. Our team is here to help you navigate financing options that align with your improvement plans—and may support your broader financial strategy.
When you’re ready to get started, we’ll help you move forward with clarity and confidence. Start your home equity application with MIDFLORIDA.
