finance calculator
HELOC Cost / Tax “Savings” Calculator
See the real after-tax cost of HELOC interest and how balances can grow if you keep charging expenses to the line.
Results
- Annual interest cost
- $4,800
- Tax “savings” from interest deduction
- $1,056
- After-tax cost of interest
- $3,744
- Effective after-tax rate
- 6.24%
- Monthly after-tax cost
- $312
- Balance after a year if you keep charging
- $62,400
How to use this calculator
- Enter current HELOC balance, rate, and your marginal tax bracket.
- Add how much new spending you might put on the HELOC each month (optional).
- Review the after-tax cost, effective rate, and projected balance growth if you only pay interest.
Inputs explained
- Marginal tax rate
- Top bracket percentage used to estimate the deduction benefit (if deductible for you).
- New spending
- Extra monthly charges that increase the balance if you’re making interest-only payments.
How it works
Annual interest = balance × APR.
Tax “savings” = interest × marginal tax rate. After-tax cost = interest − tax savings.
Effective after-tax rate = APR × (1 − tax rate). If you keep charging expenses and only cover interest, the balance grows by those new charges each year.
When to use it
- Illustrating how small tax benefits don’t justify carrying HELOC debt.
- Showing how balances grow when people treat a HELOC like a credit card.
- Comparing after-tax cost vs. perceived tax savings.
Tips & cautions
- Interest is only deductible in certain cases (e.g., qualified home improvements); always check your eligibility.
- Raising your payment above interest is the only way to shrink principal if you keep charging expenses.
- Use a realistic marginal tax rate; if you don’t itemize, tax savings could be $0.
- Assumes interest-only payments for the balance growth illustration.
- Does not include upfront fees or rate resets; HELOCs are usually variable-rate.
- Tax deduction eligibility varies; this is an estimate, not tax advice.
Deep dive
Calculate the after-tax cost of HELOC interest, your effective rate after any deduction, and see how balances grow with new charges.
Enter balance, rate, tax bracket, and monthly spending to understand real HELOC costs versus perceived tax savings.
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