Quick Answer
PACE loan payments are partially tax deductible — but only under certain conditions. Most of the payment (like the principal and admin fees) is not deductible. However, the interest portion may qualify if you itemize deductions. Read on to learn how it works.
What Is a PACE Loan?
PACE stands for Property Assessed Clean Energy. It allows homeowners to finance upgrades like:
- Hurricane impact windows & doors
- Roof replacement
- Solar panels
- HVAC and insulation
Instead of a traditional loan, the cost is repaid through your property tax bill — spread out over 10 to 30 years.
What Does the IRS Say?
According to the IRS, you can deduct certain real estate taxes if they:
- Are based on property value (“ad valorem”)
- Are used for public benefit
PACE assessments in Florida are typically non-ad valorem — meaning they are not based on value. This makes full deductibility not automatic.
What Parts May Be Deductible?
| Deductible | Explanation |
|---|---|
| Interest Portion | May be deductible as part of real estate taxes if itemized |
| Energy Tax Credits | Some energy-saving upgrades may qualify for federal tax credits (e.g., solar) |
What Is Not Deductible?
- The principal (the project cost itself)
- Fees and service charges from the PACE provider
- Any amount if you take the standard deduction
Do I Need to Itemize?
Yes. To deduct any portion of your PACE payment, you must:
- Use Schedule A on your federal return
- Forego the standard deduction
- Have other deductible expenses (mortgage interest, property tax, medical, etc.)
Sample Deduction Breakdown
Example: A $20,000 PACE project for new impact windows, spread over 20 years.
Annual Assessment on Property Tax Bill:
- Principal: $1,000
- Interest: $350
- Fees: $150
Only the $350 (interest) may be deductible — if you itemize.
PACE vs Traditional Financing
| Feature | PACE Financing | Personal Loan or HELOC |
|---|---|---|
| Credit check required? | No | Yes |
| Repaid via tax bill? | Yes | No |
| Affects home resale? | Yes (lien stays) | No |
| Possible deduction? | Interest only | Mortgage or loan interest |
Common Questions
Q: Can I deduct my entire PACE loan?
A: No. Only the interest portion might be deductible.
Q: Is the deduction guaranteed?
A: No. It depends on whether the IRS views it as a qualified real estate tax.
Q: What if I refinance or sell my home?
A: The PACE lien usually must be paid off at closing.
What To Do Next
Want to make energy-efficient or hurricane-protected upgrades with PACE?
🏡 SFL Builders Group is your trusted, licensed Florida contractor. We help homeowners get approved for PACE and install:
- Impact windows & doors
- Energy-saving roofing
- Solar and battery backup
✅ 100% financing available
✅ No upfront costs
✅ Fast approval process
Contact us for a free consultation and PACE assessment!
Tags: PACE loan Florida, PACE tax deduction, hurricane window financing, Florida energy upgrades, PACE vs HELOC, SFL Builders Group
