Is HELOC Interest Tax Deductible on Rental Property?

If you own a rental property, a Home Equity Line Of Credit (HELOC) can be a handy way to borrow money for repairs or improvements. But one of the first questions most landlords ask is, “Can I deduct the interest on my taxes?”

The answer is often yes, but only if you play by the IRS rules and keep good records.

So, is HELOC interest tax deductible on rental property? With the 2025 Tax Relief Act making some mortgage interest rules permanent and adding new flexibility starting in 2026, it’s worth a quick refresher on what’s allowed right now.

How HELOCs Work And Why They Matter For Taxes

A HELOC is a revolving loan secured by your home. You can draw funds as needed up to a set limit, and pay interest only on what you’ve borrowed. For tax purposes, the key issue isn’t just that you borrowed from a HELOC, it’s what you spent the money on.

Under current rules in 2025, interest on a HELOC may be deductible if the money is used to buy, build, or substantially improve the home that secures the loan. If you spend the borrowed money on personal expenses like vacations or credit cards, that interest is not deductible.

When it comes to rental property, you can usually deduct interest on money you borrow to improve, repair, or operate the property. But the IRS expects you to document exactly how you used the borrowed funds.

Deducting HELOC Interest For Rental Property In 2025

In 2025, you can deduct HELOC interest for your rental property if:

• You used the borrowed money directly for that rental property (repairs, renovations, new appliances etc.).
• The HELOC is secured by the same property you’re improving
• You keep clear records showing how much you borrowed and where it went.

If you use part of the HELOC for the rental and part for personal bills, you have to split the interest and only deduct the rental portion on your Schedule E.

Remember, without proper documentation, you risk losing the deduction.

What Changes In 2026 Under 2025 Tax Relief Act

The 2025 Tax Relief Act law gives rental owners more flexibility starting in 2026. Under the new rule, you’ll be able to deduct interest on a loan used for your rental property, even if that loan is secured by a different property, like your personal home, as long as you can trace the funds to rental use. This is a big help if you want to tap equity in one property to fix up another. 

Tips To Make Sure You Qualify

• Document everything. Keep receipts, bank transfers, and invoices showing where every dollar went.
  
• Split personal and rental spending. If you need to use the HELOC for multiple purposes, consider opening separate accounts so you can keep the rental portion clean.
  
• Check the loan limits. The $750,000 cap on mortgage and acquisition debt for new loans remains in place under the 2025 Tax Relief Act.
  
• Confirm “substantial improvement.” Routine maintenance may not always count. Larger renovations and additions are more likely to qualify.
  

The Bottom Line

Yes, you can often deduct HELOC interest on a rental property, but only the part that’s tied directly to that rental.

If you’d like us to look at your HELOC statements, rental expenses, and all the receipts, we’d be glad to help you map it all out. Let’s make sure you get every deduction you deserve, and avoid surprises later in your tax return.

Book a time with our team and we’ll get right back to you.

Until next time!