The Internal Revenue Service (IRS) will provide tax relief for homeowners suffering property losses due to the effects of certain imported drywall installed in homes between 2001 and 2009. It will allow affected taxpayers to treat damages from corrosive drywall as a casualty loss and will provide a ”safe harbor” formula for determining the amount of the loss.
Though government agencies have not completed their report on the drywall, an April 2010 article in BUILDER magazine says that the Department of Housing and Urban Development (HUD) and the Consumer Product Safety Commission (CPSC) recommend that the corrosive drywall — along with all the home’s electrical components, smoke and carbon dioxide alarms, and gas supply lines — should be ripped out and replaced. The IRS defines “corrosive drywall” as drywall identified as problem drywall under the two-step identification method published by the CPSC and HUD in their interim guidance dated Jan. 28, 2010.
The IRS's Revenue Procedure 2010-36 states:
Individuals who pay to repair damage to their personal residences or household appliances resulting from corrosive drywall may treat the amount paid as a casualty loss in the year of payment. Taxpayers who have already filed their income tax return for the year of payment generally have three years to file an amended return and claim the deduction.
The amount of a loss that may be claimed depends on whether the taxpayer has a pending claim for reimbursement of the loss through property insurance, litigation, or otherwise. In cases where a taxpayer does not have a pending claim for reimbursement, the taxpayer may claim as a loss all unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances resulting from corrosive drywall.
If a taxpayer does have a pending claim (or intends to pursue reimbursement), a taxpayer may claim a loss for 75 percent of the unreimbursed amount paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that resulted from corrosive drywall.
A taxpayer who has been fully reimbursed before filing a return for the year the loss was sustained may not claim a loss. A taxpayer who has a pending claim for reimbursement (or intends to pursue reimbursement) may have income or an additional deduction in subsequent taxable years depending on the actual amount of reimbursement received.
The CPSC has received about 3,628 reports from residents in 39 states, as well as Washington, D.C., American Samoa, and Puerto Rico, from residents who believe their health symptoms or the corrosion of certain metal components in their homes are related to the presence of drywall produced in China. The percentage of reports by state:
—Nina Patel, senior editor, REMODELING. http://www.remodelingmag.com