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rakhi.v, Tax Attorney
Category: Tax
Satisfied Customers: 4543
Experience:  Have graduated in Law with specialization & emphasis in Financial Laws and has working experience of over a decade.
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I live in San Diego County (CA) and would like to install 3

Customer Question

I live in San Diego County (CA) and would like to install 3 energy efficiencies into my home: 1) a 7KW Solar system, 2) Cool White GenFlex EZ TPO (Energy Star certified and Title 24 "Cool Roof" Rated) and 3) MiniSplit heat pump/AC system(s) for hom which are AHRI Certified (are also Energy Star certified and meet Tax Credit requirements of SEER >=15 and HSPF >8.5).
San Diego has a HERO/PACE loan program where energy efficient items can be financed and placed on property tax bill.
My questions relate to how most favorably treat tax wise...
Can full amount of HERO loan (if all financed with HERO) be used from Property tax bill as a tax deduction like property taxes or must it be limited to interest only? Contractors and others justify full amount vs. interest only but is there anything to back this up?
Can Solar and Title 24 Cool Roof be combined and total placed on Fed 5695 with 30% tax credit? Again, some justify cool roof as more than just a structure for solar and refer to Section 25D(e)(2) among others for support.
Submitted: 1 year ago.
Category: Tax
Expert:  rakhi.v replied 1 year ago.

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

To begin with, all of the equipment that you mention do qualify. However, you will be able to deduct only the interest part of it. The main reason being -- what you are doing is defined as "Improvements" and not "Repairs".

According to page 151 of IRS Publication No. 17, the principal portion of the payment is deductible for repairs, but not for improvements. To determine whether a specific HERO program assessment is entirely tax deductible or not, we recommend contacting a tax professional. Please refer the Publication No. 17 from the below link.

Just as an additional information, assuming the HERO program is available in your area, homeowners must have at least 10% equity in their home, must be current on mortgage and property tax payments, must not have any outstanding involuntary liens, and must not have declared bankruptcy in the past 7 years in order to qualify.

The following are very informative FAQs, just in case if you need.

I am sure this would help.

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Warm Regards,

Customer: replied 1 year ago.