If there is any question, the IRS will ask for proof of what the funds were used for. Copies of contracts, receipts for materials and labor, etc.It does not matter when the loan was taken out. If you used the HELOC 2 years ago to buy that sweet BMW in the garage, you can no longer deduct the interest. If that's the case, your Republican buddies in Congress just bent you over the table and rammed it up your a$$.