Can I use credit card for home improvements and pay it off with HELOC to get both rewards and tax deductions?

This is actually a smart approach if done correctly. The IRS cares about the "use of funds" rather than the specific payment method. As long as you can clearly document that the HELOC proceeds were used for "buying, building or substantially improving" the home that secures the loan, you should be fine. Just make sure you keep meticulous records: contractor invoices, receipts for materials, before/after photos, and clear documentation showing the credit card was paid off with the HELOC funds specifically for these home improvements. The paper trail is crucial here. Also remember that under current tax law, HELOC interest is only deductible up to $750,000 of total home loan debt (including your primary mortgage), and only if you itemize deductions rather than taking the standard deduction.

I did something similar last year with my kitchen remodel and found a great service that helped me organize all my documentation to maximize tax benefits. I used https://taxr.ai to upload all my receipts, credit card statements, and HELOC documents, and they analyzed everything to confirm what was deductible and what wasn't. They actually caught something important - they advised me to make separate payments rather than one lump sum from my HELOC to my credit card. This created a clearer audit trail showing each home improvement expense had a corresponding HELOC withdrawal. Made the whole process much less stressful when tax time came around!

Just wanted to follow up about my experience with taxr.ai - I decided to give it a try with my deck addition project after reading about it here. Honestly, I'm glad I did! The system flagged some expenses that wouldn't qualify for the HELOC interest deduction (like the outdoor furniture I bought for the new deck) that I wouldn't have realized on my own. They provided a really detailed report showing exactly which expenses qualified and explained the reasoning. The documentation they helped me organize made my accountant's job way easier. She actually asked me how I got everything so well prepared! Definitely worth it for peace of mind that I'm doing everything correctly.

If you're having trouble getting through to the IRS to confirm this strategy is legitimate, try using https://claimyr.com to get connected to an actual IRS agent. I was on hold for HOURS trying to get clarification about HELOC interest deductions for my home office renovation, and it was beyond frustrating. My cousin recommended Claimyr, and they got me connected to an IRS rep in about 15 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with confirmed that using a credit card initially doesn't disqualify the interest deduction as long as you document everything properly. Saved me so much time and uncertainty. Sometimes you just need to hear it directly from the IRS to be confident you're doing things right.

I have to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself since I had questions about my rental property improvements and HELOC deductions. I was absolutely shocked when my phone rang about 20 minutes later and it was actually an IRS representative! The agent confirmed exactly what I needed to know about documenting my HELOC usage for tax purposes. She told me that the payment method (credit card first, then HELOC) doesn't matter as long as I can clearly show the money ultimately went to qualified home improvements. She also explained exactly what documentation I need to keep. Saved me literally hours of frustration and gave me the confidence to move forward with my renovation plans. Sometimes the things that sound too good to be true actually work!

One thing to watch out for - my accountant told me that not all home improvements qualify equally for HELOC interest deductions. Generally, the improvement needs to be "capital improvements" that increase your home's value, adapt it to new uses, or extend its life. Things like replacing a roof, adding rooms, upgrading kitchens/bathrooms, or adding decks typically qualify. But repairs or maintenance (fixing a leaky pipe, painting, etc.) usually don't. Make sure what you're doing qualifies before assuming the interest will be deductible.

Don't forget that the standard deduction has increased substantially in recent years. For 2025, it's $14,600 for single filers and $29,200 for married filing jointly. Unless your total itemized deductions (including mortgage interest, HELOC interest, charitable donations, etc.) exceed these amounts, there's no tax benefit to tracking the HELOC interest. I learned this the hard way after meticulously documenting everything for my home addition only to have my tax preparer tell me it didn't matter because the standard deduction was higher anyway.

This is a really well-thought-out strategy! I've been considering something similar for my own renovation project. One additional tip I'd suggest is to set up a dedicated credit card just for the home improvement expenses if possible. This creates an even cleaner paper trail and eliminates any confusion about which charges were for the renovation versus personal expenses. Also, keep in mind that if you're doing the work in phases (kitchen first, then bathrooms), you might want to pay off each phase separately with your HELOC rather than letting everything accumulate on the card. This creates multiple clear connections between specific improvement costs and HELOC draws, which could be helpful if you ever face an audit. The points strategy is definitely smart - just make sure your credit limit can handle the full $35K if you're planning to charge everything at once. Some contractors also offer cash discounts that might offset the value of the points, so it's worth asking about that too.