Although the tax laws have changed, in some cases you can still deduct interest paid on your home equity loan or home equity line of credit (HELOC). The IRS says that you can deduct the interest you pay on a home equity loan (HELOC) that was used to “buy, build, or substantially improve” the home that the loan is secured by. That’s a big change from prior years when the interest was tax deductible regardless of what the home equity loan money was used for. As under the prior law, an eligible home equity loan or HELOC must be secured by the taxpayer’s main home or second home (qualified residence). It must not exceed the cost of the home and must meet other requirements as well. For the 2018 tax year, people who file jointly can only deduct interest on “qualified residence loans” worth $750,000. ” This is down from the previous limit of $1,000,000. For married taxpayers filing separately, the new limit is $375,000, down from $500,000 previously.
You can no longer deduct interest on home equity loans that are used for personal expenses, such as vacations or to pay off credit card debt. According to the IRS website, home improvements that are approved are any that “add to the value of your home, prolong your home’s useful life, or adapt your home to new uses. ” To clarify, the IRS wrote “repairs that maintain your home in good condition, such as repainting your home, aren’t substantial improvements. However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. ”.
A lot of people use the value of their home as collateral for home equity lines of credit (HELOCs) to get money. HELOC interest is usually tax-deductible, just like mortgage interest, but there are some differences in how you have to report it on your taxes. This makes a lot of HELOC borrowers wonder: does a HELOC get a 1098?
The short answer is maybe.
What is a 1098?
First let’s quickly review what a 1098 is. IRS Form 1098, also called the Mortgage Interest Statement is a tax form lenders are required to send to mortgage borrowers by January 31 each year. It reports the amount of mortgage interest paid on a loan in the prior tax year.
This allows homeowners to claim the mortgage interest deduction on their tax return. For 2021 taxes, you would receive a 1098 by the end of January 2022 showing your 2021 mortgage interest.
HELOC 1098 Requirements
For mortgage loans and home equity loans, lenders must send a 1098. However, the requirements are a bit different for HELOCs.
According to IRS rules, lenders must provide a 1098 if the HELOC:
- Is secured by the taxpayer’s main home
- The home secured the HELOC for the entire year
- Total interest paid was $600 or more
This means if you borrowed a small amount in 2021 and paid less than $600 in HELOC interest, your lender likely won’t provide a 1098.
What to Do Without a HELOC 1098
Don’t worry if you don’t get a 1098 for your HELOC. You can still deduct the interest, though. You’ll just have to find it.
Here are some options for documenting HELOC interest without a 1098:
- Review monthly HELOC statements for the total interest paid in 2021.
- Log in to your HELOC account online to see interest details.
- Call your lender to request a 2021 interest statement.
- Review your December 2021 HELOC statement for year-end interest totals.
You don’t need a 1098 to claim the deduction as long as you have proof of the total interest for 2021. I think you should keep your HELOC statements or make notes in case the IRS ever asks for proof.
Claiming the HELOC Interest Deduction
When tax time rolls around, you’ll claim the HELOC interest deduction in the same way regardless of whether you received a 1098.
The key steps are:
- Enter your HELOC lender information when prompted.
- If you have a 1098, enter the interest amount from Box 1.
- If no 1098, enter the total 2021 interest you documented.
- Complete any additional questions.
Be sure to only deduct interest on a HELOC used for home improvements or other personal use. Interest on a HELOC used for business or investments cannot be deducted on your personal tax return.
The HELOC interest deduction is claimed on Schedule A along with your mortgage loan interest. It is subject to the same rules and restrictions as regular mortgage interest.
The Takeaway
While lenders don’t always have to issue a 1098 for HELOC interest, that doesn’t mean you miss out on the deduction. As long as you track down the interest totals for the year, you can claim the tax break whether you receive the form or not. Just be sure to keep good records in case the IRS ever requests them.
Examples of home equity loan expenses that not are eligible for deducting interest
Paying off credit cards
When deducting interest paid on a home equity loan or HELOC, be sure to keep all receipts and invoices for labor and materials. You’ll need them in case you ever get audited. Before tax time, you should receive an IRS Form 1098 (Mortgage Interest Statement) from your lender or lenders. This form will show the interest you paid on your primary mortgage, home equity loan, or home equity line of credit in the previous year. Contact your lender if you haven’t received it.
Examples of home equity expenses eligible for tax-deductible interest
Replacing the roof or siding
Building on room additions
Electrical or plumbing upgrades
New driveway or walkways
Adding on a new deck
HELOC Interest Rate Explained – How are they calculated?
FAQ
Does HELOC issue 1098?
If you want to deduct the interest you paid on a home equity loan or HELOC, you must keep all of the receipts and bills for materials and labor. You’ll need them in case you ever get audited. Before tax time, you should receive an IRS Form 1098 (Mortgage Interest Statement) from your lender or lenders.
Do you get a 1099 for a HELOC?
When a HELOC is discharged on the lender’s books, the lender is required by the IRS to issue a 1099-C for the forgiven portion of the loan to the borrower.
Is a HELOC considered taxable income?
Do I have to pay taxes on the money I borrow from my HELOC? The IRS does not consider money received from a HELOC to be taxable income. Therefore, you should not need to pay income taxes on the amount you borrow. Mar 4, 2025.
Where to find home equity loan interest on 1098?
You should receive a Form 1098 from your current loan servicer at the end of the year. The amount listed in Box 1 shows the amount of interest you paid.