HELOC interest deductibility follows how the borrowed money was actually used, not what secures the loan — the same HELOC balance can be partly deductible and partly not.
How it works
Multiplying annual interest paid by the share of proceeds traced to a deductible use (buying, building, or substantially improving the home, or an investment/business purpose) gives the deductible portion; the remainder is non-deductible.
What this does not include
This does not include the strict documentation the IRS expects to support tracing — a dedicated account holding only HELOC proceeds with a clear paper trail, since commingled funds can make tracing difficult to substantiate on audit.
How to use this calculator
- Enter annual HELOC interest paid and the share of proceeds traced to a deductible use.
Frequently asked questions
Where is deductible investment-use HELOC interest claimed?
Typically on Schedule E if traced to a rental or investment property, rather than as a home mortgage interest deduction on Schedule A.
What if HELOC proceeds are split across multiple uses?
Each use is traced and treated separately — a HELOC used partly for a rental down payment and partly for a personal vacation has interest that’s part deductible, part not, exactly as this calculator models.
Did tax law changes affect HELOC deductibility?
Yes — the requirement that funds be used to buy, build, or substantially improve the home (for the home-acquisition-debt path) was made permanent under the OBBBA, continuing the stricter post-2018 rules.
