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.