The Home Energy Renovation Opportunity (HERO) Plan provides financing for high-cost energy related improvements, such as solar panels, air conditioning, roofing, windows, lighting controls, and landscaperelated products, for a taxpayer’s home with principal and interest payments added to the taxpayer’s property tax bill for the year. It is similar to PACE (Property Assessed Clean Enegy) financing.

Although included in the property tax bill, the HERO payments are separately stated and not deductible as property tax. However, the portion of the HERO payment that represents interest is generally deductible as home mortgage interest. Although the interest portion is not spelled out on the property tax bill, the HERO program does supply each borrower with a loan amortization schedule that can be used to determine the amount of interest paid for the year and which may be deductible. With the HERO program no Form 1098 is issued, and care must be taken on how the interest is deducted on the tax return to avoid receiving a letter from the IRS.

The HERO program originated in Southern California but has since spread to almost all counties in California, and even to Florida and Missouri (Wall Street Journal 7/26/19); ads for this program pop up frequently on the Internet. Some contractors actively promote this program to individuals as a convenient way to finance home improvements since the HERO program has very liberal qualifications, with no money down, fixed rates and variable terms of 5-20 years. However, compared to other financing sources’ interest rates, those charged by the HERO program are quite high, generally more than 8%, and individuals should explore other avenues of financing first.