HELOC Tax Deduction Calculator (2026 IRS Pub 936)
See exactly how much of your HELOC interest is tax-deductible under current IRS rules. Splits acquisition use vs equity use, applies the $750,000 combined mortgage cap, and estimates real tax savings based on your filing status and bracket.
Deduction Breakdown
HELOC interest is tax-deductible in 2026 only when the borrowed funds are used to buy, build, or substantially improve the home that secures the loan, and only when total combined home-secured debt stays under $750,000 ($375,000 if married filing separately). Interest on HELOC funds used for any other purpose — debt consolidation, tuition, vacations, investments — is not deductible, per IRS Publication 936.
How HELOC Interest Deduction Works in 2026
The Tax Cuts and Jobs Act of 2017 fundamentally rewrote home equity interest rules, and the OBBB Act 2025 extended those rules through tax year 2026 and beyond. The deduction now hinges on a single test: did the funds buy, build, or substantially improve the same home that secures the HELOC? If yes, the interest is acquisition-debt interest and qualifies. If no, even though the loan is secured by your home, the interest is non-deductible. This applies to every HELOC and home equity loan originated since December 15, 2017 (source: IRS Publication 936).
Acquisition Debt vs Home Equity Debt
Acquisition debt finances the home itself: purchase, construction, or substantial improvements like additions, kitchen remodels, new roofs, HVAC replacement, or anything that adds value, prolongs useful life, or adapts the home to new uses. Home equity debt — the non-deductible category — covers everything else, regardless of how the loan is secured. If you draw $50,000 from your HELOC and spend $30,000 on a kitchen remodel and $20,000 paying off credit cards, only the interest on the $30,000 portion qualifies. The calculator above splits your interest pro-rata between the two pools.
Standard Deduction vs Itemizing — When the HELOC Deduction Matters
The HELOC deduction only helps if you itemize on Schedule A, and itemizing only helps when itemized deductions exceed the standard deduction. For 2026, the standard deduction is $15,000 single, $30,000 married filing jointly, and $22,500 head of household (per IRS, OBBB Act 2025). For a typical borrower with a $30,000 acquisition-use HELOC at 9%, deductible interest is around $2,700 per year — meaningful only if combined with a large mortgage interest deduction, state and local taxes (SALT-capped), and charitable contributions push you past the standard deduction.
How the $750,000 Mortgage Debt Cap Affects HELOCs
The cap is combined across all home-secured debt on the same property. If your primary mortgage is $700,000 and you draw $100,000 of HELOC for an addition, only $50,000 of that HELOC qualifies for the deduction — the remaining $50,000 is excess debt and its interest is non-deductible, even though it was used for a qualified improvement. Married filing separately uses a $375,000 cap. Older mortgages originated before December 16, 2017 retain the legacy $1,000,000 cap, but most current HELOC borrowers fall under the post-TCJA rules. Last updated: May 2026.
Frequently Asked Questions
Is HELOC interest tax deductible in 2026?
HELOC interest is deductible only when the loan proceeds are used to buy, build, or substantially improve the home that secures the HELOC, and only if total combined home-secured debt stays under the $750,000 cap ($375,000 if married filing separately). Interest on funds used for any other purpose (debt consolidation, tuition, vacations) is not deductible (source: IRS Publication 936).
What counts as 'buy, build, or substantially improve' the home?
Substantial improvements add value, prolong useful life, or adapt the home to new uses — kitchen remodels, additions, new roofs, HVAC replacement. Routine repairs (painting, fixing a leak) generally do not qualify. The improvement must be to the same home that secures the HELOC (source: IRS Publication 936).
Can I deduct HELOC interest used for debt consolidation?
No. Since the Tax Cuts and Jobs Act of 2017 (in effect through tax year 2025 and extended further by the OBBB Act 2025), home equity debt used for purposes other than home improvement is not deductible — even though the loan is secured by your home. Credit card payoff, auto purchases, and tuition all fail the qualified-use test.
How does the $750,000 mortgage cap apply to my HELOC?
The cap is combined: your primary mortgage plus the deductible portion of any HELOC or second mortgage cannot exceed $750,000 ($375,000 MFS) for loans originated after December 15, 2017. If your primary mortgage is $700,000, only $50,000 of HELOC acquisition use can qualify for deduction — anything above is excess debt.
Should I itemize to take the HELOC deduction?
Only if your itemized deductions (mortgage interest + SALT + charity + medical) exceed the 2026 standard deduction: $15,000 single, $30,000 MFJ, $22,500 head of household. Most middle-income borrowers with smaller HELOCs find the standard deduction wins. Run both scenarios in tax software before deciding.
Do I lose the deduction if I sell the home?
If the HELOC is paid off at closing, the deduction simply ends. If you keep the HELOC and move it to a new home, the new home must secure the debt and the funds must still trace to qualified use on the new property. Talk to a CPA before transferring debt across properties.
What records do I need to prove qualified use?
Keep itemized invoices, contractor receipts, permits, and bank statements showing the HELOC draw was paid directly to the contractor or to home-improvement vendors. The IRS can disallow the deduction years later if you cannot trace the funds to qualified use. Store records for at least 3 years past the tax year filed (source: IRS Publication 936).