SBLOC vs HELOC after-tax calculator

Pretax rate is a misleading guide. Change the use of proceeds and the after-tax answer flips. Run your numbers.

By Tyler Singletary · Last reviewed

HELOC wins by 139 bps after tax · 5.36% HELOC vs 6.75% SBLOC

Your inputs

This is the lever. Only qualified home improvement on the home securing the HELOC unlocks the IRC 163(h)(3) deduction.

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Rate defaults are 2026 averages — HELOC prime+0.75%, Schwab PAL SOFR+2.25%. Adjust to your lender's quote.

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After-tax effective rate

Lower after-tax cost

HELOC

5.36%

Pretax: 8.25%

Interest deductible

SBLOC

6.75%

Pretax: 6.75%

Non-deductible

HELOC wins by 1.39 percentage points (139 basis points) after tax at this combination of inputs.

How the math works

HELOC interest is deductible under IRC 163(h)(3) only when the proceeds buy, build, or substantially improve the home that secures the loan, subject to the $750K mortgage indebtedness cap. For any other use — a second-home down payment, a business investment, a personal expense — HELOC interest becomes non-deductible personal interest.

SBLOC interest is generally non-deductible under IRC 163(h)(1) unless the proceeds are traced to qualifying investment purposes under IRC 163(d). This calculator treats all SBLOC uses as non-deductible for conservative educational framing; if you have a tracing arrangement with your tax advisor, the SBLOC's true after-tax cost may be lower than what is shown here.

The after-tax rate formula is straightforward: deductible interest times one minus your combined federal-and-state bracket; non-deductible interest stays at the pretax rate. The tool does not account for the SBLOC's mark-to-market collateral risk, the HELOC's origination friction, or any other non-rate factor — see the parent post for the full six-variable comparison.

Want the full reasoning, the IRC citations, and the worked examples?

Read the SBLOC vs HELOC comparison →