A compass system for a vehicle includes a compass sensor and compass circuitry. The compass sensor is disposed at or near an interior heated surface of a windshield of a vehicle equipped with the compass system. The compass circuitry, responsive to an output of the compass sensor indicative of sensed magnetic signals or fields, is operable to determine a directional heading of the vehicle. The compass circuitry is operable to determine a magnetic signature generated by a heating element that heats the interior heated surface of the windshield when the heating element is powered. The compass circuitry, responsive to a determination that the heating element is powered, is operable to compensate the sensed magnetic signals to determine the vehicle directional heading. The compensation is derived from the determined magnetic signature. The compass circuitry may compensate the sensed magnetic signals by applying an offset derived from the determined magnetic signature.