Before the Tax Cuts and Jobs Act of 2017 became law, homeowners could deduct on their taxes the interest they paid on home equity loans no matter how they used the money. That has now changed. According to the IRS, you can now only deduct the interest on home equity loans if you use the money to substantially improve the home that secures the loan.
This means that you can’t deduct the interest if you use a home equity loan to pay off credit card debt or cover a child’s college tuition, for example.
If you use your home equity loan to build a new primary bedroom suite on your home, you can deduct the interest you pay on that loan. That’s because you’re using the proceeds from the loan to improve the home.