Can you deduct PACE (Property Assessed Clean Energy) loan interest? If so, how? This type of loan is paid through property tax bill and there is no form 1098.

rlcscde · ‎March 23, 2026

I am unable to enter this in turbo tax 2025. Turbo tax keeps asking for 1098. According to my research this is allowed because the loan is secured by home and the money is used to improve the house.

maglib

TT info on PACE https://turbotax.intuit.com/tax-tips/home-ownership/energy-tax-credit-which-home-improvements-qualif...

PACE property improvements are entered under the Deductions & Credits tab> Your Home section.>Select "Start" or "Revisit" next to Home Energy Credits. From there, you can report solar, geothermal, or other qualified energy improvements (Form 5695), including related financing costs.

@rlcscde

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Mike9241

from the IRS

There are popular loan programs that finance energy saving improvements through government-approved programs. You sign up for a home energy system loan and use the proceeds to make energy improvements to your home. In some programs, the loan is secured by a lien on your home and appears as a special assessment on your real estate property tax bill over the period of the loan. The payments on these loans may appear to be deductible real estate taxes; however, they are not deductible real estate taxes. Assessments associated with a specific improvement benefitting one home are not deductible. However, the interest portion of your payment may be deductible as home mortgage interest. Refer to Publication 936, Home Mortgage Interest Deduction, to see whether you might qualify for a home mortgage interest expense deduction.

this was issued in 2016, before the cap on mortgage loans. you'll probably need to use the pub to figure the deductble interest if you exceed the cap on mortgage debt. otherwise you would enter it as mortgage interest for which you did not receive a 1098. HOWEVER I HAVE NOT FOUND A WAY TO ENTER THIS IN INTERVIEW MODE. I have a desktop verrsion which allows entry in forms mode but that mode does not exist in online. perhaps online is different and has a provison

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Can you deduct PACE (Property Assessed Clean Energy) loan interest? If so, how? This type of loan is paid through property tax bill and there is no form 1098.