IRS Gives Tax Relief for Homeowners with Corrosive Drywall

The IRS is offering tax relief for those subjected to property loss or damage due to corrosive drywall installation in their homes. Between 2001 and 2009, US builders installed imported drywall in some homes that was eventually deemed to be harmful. The Consumer Product Safety Commission conducted a study that found that certain imported drywall emitted sulfur gas odors and contributed to the corrosion of copper electrical wiring and other copper components in the home. Homeowners were forced to either remove or replace massive amounts of drywall and damaged appliances, resulting in thousands of dollars in out-of-pocket expenses.

As a result, the Revenue Procedure 2010-36 provides tax relief to homeowners whose homes contain corrosive drywall. To determine if you qualify, you can use the two-step identification method created by the CPSC and Department of Housing and Urban Development:

  1. A visual threshold inspection must be conducted that demonstrates blackening of copper electrical wiring or A/C evaporator coils.
  2. Homeowners with metal corrosion damage must have at least two corroborating conditions (such as confirmed Chinese drywall markings, elevated hydrogen sulfide, carbonyl sulfide and/or carbon disulfide emitting from drywall samples).

Individuals who own homes that contain imported drywall that meets the requirements for corrosive drywall can seek the following financial relief.

Damage Repair Can Be Treated as a Casualty Loss

If you had to pay out of pocket to repair appliances or areas of the home because of damage caused by corrosive drywall, you can treat the payment as a casualty loss in the year of the payment.

Those Who Have Already Filed Can File an Amended Tax Return

Even if you’ve already filed your income tax return for the year without claiming the loss, you have up to three years to file an amended return and claim the deduction from corrosive drywall expenses. Loss hinges on whether the homeowner already has a claim pending through property insurance or litigation.

Those with a Pending Claim May Still Claim a Loss

In a case in which you have a pending claim, during the taxable year, you can still claim a loss for 75 percent of the total that has not been reimbursed. However, if you’ve already been compensated for a claim you filed the previous year, you cannot claim a loss at this time.

Remember, in order to claim your drywall damage on your taxes, you must have spent at least $500 to repair damages, and the amount paid for repairs must exceed 10 percent of the taxpayer’s adjusted gross income. Included in this tax break are appliance replacements that were necessitated by damage from corrosive drywall. 

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