Do You Get a 1098 for a HELOC and Can You Deduct It?

If you paid $600 or more in interest on your home equity line of credit last year, your lender is required to send you a Form 1098 for the HELOC, the same statement used for a traditional mortgage.¹ Getting the form does not by itself mean the interest is deductible. Whether you can actually write it off depends on how you spent the money and whether you itemize.

When Your Lender Sends the 1098

Any lender that receives $600 or more in mortgage interest from an individual during the year must file Form 1098 with the IRS and furnish a copy to the borrower by January 31.¹ For this rule, the IRS treats “mortgage” broadly as any obligation secured by real property, and the Form 1098 instructions specifically say interest on a line of credit secured by real property is reportable regardless of how the lender classifies it internally.² A HELOC qualifies because the lender holds a lien on your home.

The $600 threshold is applied to each loan separately. If you have a first mortgage and a HELOC with the same lender, they check each one on its own. You could receive a 1098 for the primary mortgage but not the HELOC if HELOC interest came in below $600.

One boundary to know: the reporting requirement covers interest paid by individuals (including sole proprietors). Lenders are not required to file Form 1098 for interest received from a corporation, partnership, trust, or estate.²

Receiving a 1098 Is Not the Same as Being Able to Deduct

The 1098 reports what you paid. It says nothing about whether that interest is deductible, and that’s where many homeowners get tripped up.

HELOC interest is deductible only to the extent you used the borrowed funds to buy, build, or substantially improve the home that secures the loan. IRS Publication 936 puts it plainly: “you can no longer deduct the interest from a loan secured by your home to the extent the loan proceeds weren’t used to buy, build, or substantially improve your home.”³ The rule sits in 26 U.S.C. § 163(h)(3)(F).⁴

Qualifying uses include a major kitchen renovation, roof replacement, adding a room, finishing a basement, and similar capital improvements to the property securing the HELOC. Non-qualifying uses include paying off credit cards, tuition, buying a car, funding a vacation, or investing. Money used for anything other than improving the home itself produces interest that is not deductible, whatever the 1098 shows.

This restriction, first imposed by the Tax Cuts and Jobs Act, was extended by the One Big Beautiful Bill Act, so the “buy, build, or substantially improve” test continues to apply for 2026 and beyond.⁵

The Debt Ceiling That Caps the Deduction

Even when every HELOC dollar goes toward qualifying improvements, there’s a cap on how much combined home debt can produce a deduction. The limit depends on when the debt was taken out:

Debt incurred after December 15, 2017: interest is deductible on up to $750,000 of combined acquisition debt ($375,000 if married filing separately). The cap covers your first mortgage plus any qualifying HELOC balance.³
Debt incurred on or before December 15, 2017: the older $1 million cap ($500,000 if married filing separately) still applies to those grandfathered loans.⁴

The cap is a combined total across qualifying debt on your main home and second home. If you carry a $600,000 first mortgage from 2020, only $150,000 of a new HELOC used for improvements fits under the $750,000 ceiling. Interest on any balance above the cap is not deductible even if the money went entirely into the house.

Mixed-Use HELOCs: Splitting the Deductible Portion

If you used your HELOC for a mix of improvements and personal spending, only the improvement share of the interest can be deducted. You have to trace the loan proceeds to specific expenses, a process the IRS calls interest allocation. Under Treasury Regulation § 1.163-8T, interest on a debt is allocated the same way the debt itself is allocated.⁶

An example: you draw $80,000 from your HELOC, spend $50,000 on a new addition, and spend $30,000 on personal expenses. That’s 62.5% qualifying and 37.5% not. Apply 62.5% to the interest reported on your 1098 to get the deductible amount.

The IRS gives you a 30-day tracing window. Any payment made within 30 days before or after loan proceeds hit your account can be treated as paid from those proceeds.⁷ Deposit HELOC funds on March 1 and pay the contractor on March 20 and the connection is clean. Wait several months between the draw and the payment and the tracing gets harder to defend.

As you repay the HELOC, payments are applied first against the personal-use portion, which gradually shifts the remaining balance toward the qualified purpose and can change your deductible percentage during the year.⁷

Keep the paperwork that supports your calculation: the HELOC closing statement, bank statements showing when funds moved and where, contractor invoices, and material receipts. Hold these for at least three years after filing the return that claims the deduction.⁸

How to Report the Interest on Your Return

To take the deduction, you must itemize on Schedule A of Form 1040 rather than take the standard deduction.⁹ Report the deductible amount on the home mortgage interest line (line 8a).

If the amount you’re deducting is less than what the 1098 shows, the Schedule A instructions say to attach a statement explaining the difference. Write “See attached” next to line 8a and include a short note along the lines of: “Interest reduced because $X of the HELOC principal was not used to buy, build, or substantially improve the home.”¹⁰ That heads off the automated notice the IRS generates when Schedule A doesn’t match the 1098.

If you paid more interest than the 1098 reports (uncommon with HELOCs but possible), you can claim the larger deductible amount and attach a statement explaining why.¹⁰

Is Itemizing Actually Worth It?

Itemizing only pays off if your total itemized deductions beat the standard deduction. For 2026, the standard deduction amounts are:⁵

Married filing jointly: $32,200
Single: $16,100
Married filing separately: $16,100
Head of household: $24,150

If your HELOC interest plus your other itemizable items (property taxes, state income taxes up to the SALT cap, charitable contributions) don’t clear that number, the standard deduction wins and the HELOC deduction gives you nothing. A single filer paying $3,000 a year in HELOC interest would need roughly another $13,000 in itemizable deductions just to reach the $16,100 threshold. Run the numbers before counting on the write-off.

What If You Don’t Get a 1098

If HELOC interest came in under $600 for the year, the lender isn’t required to send a 1098.² You can still deduct the qualifying portion. Use your year-end lender statement to find the total interest paid and report the deductible share on Schedule A, entering the lender’s name and taxpayer identification number where the form asks about the 1098.

If you paid $600 or more and haven’t received the form by mid-February, contact the lender. They can reissue it. In the meantime, your year-end statement contains the same interest figure the 1098 would have reported.

1
Internal Revenue Service. About Form 1098, Mortgage Interest Statement
2
Internal Revenue Service. Instructions for Form 1098 – Mortgage Interest Statement
3
Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction
4
Office of the Law Revision Counsel. 26 USC 163 – Interest
5
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
6
eCFR. 26 CFR 1.163-8T – Allocation of Interest Expense Among Expenditures (Temporary)
7
Internal Revenue Service. Publication 550, Investment Income and Expenses
8
Internal Revenue Service. How Long Should I Keep Records
9
Internal Revenue Service. About Schedule A (Form 1040)
10
Internal Revenue Service. Instructions for Schedule A (Form 1040)