Publication 936 states “Interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan. The loan must be secured by the taxpayer’s main home or second home (qualified residence), and meet other requirements.”
What if the proceeds from the home equity loan were used to pay the balance on a credit card for which that credit card was used to purchase the improvements? Therefore, even though the proceeds were not used directly for the improvements, they were indirectly used to pay for the improvements. Would the interest be considered deductible?