IRS 17 Section 22 | HERO Tax Benefits
What are the tax benefits associated with HERO Financing?
Property owners should consult their tax advisor regarding. The availably of benefits associated with hero payments. Hero financing is recorded as an assessment on the property and is paid through a homeowner’s property tax bill. This structure is similar to that used for Mello Roos and other community assessments used to repay the cost of such improvements. The IRS states that interest on indebtedness secured by a homeowner’s residence is generally dedictible for tax purposes.
IRC Section 164(c) Addresses this subject, as does IRLS Publication 17, which provides:
IRS Publication 17. ‘Federal Income Tax,’ Section 22:
Taxes for local benefits. Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. You should increase the basis of your property by the amount of the assessment.
Local benefit taxes are deductible only if they are for maintenance, repair, or interest charged related to those benefits. If only a part of the taxes his for the maintenance , repair, or interest, you must be able to show the amount of that part to claim the deduction. If you cannot determine what part of the tax os for maintenance, repair, or interest, none of it is deductible.*
* Upon closing, HERO Provides a breakdown of principal and interest.
Generally, the California Franchise Tax Board (FTB) follows IRS policies