Good news for thousands of homeowners burdened with Chinese drywall in their homes. The Internal Revenue Service announced on Thursday, Sept. 30, 2010 that it would allow taxpayers with Chinese drywall in their homes to deduct the cost of repairs and replacement of damaged appliances.
Chinese drywall emits sulfur compounds in much higher quantities than regular drywall, corroding metal, causing damage to air conditioners, wiring and other appliances. The fumes have also been known to present a health hazard for those living in the home.
According to federal tax law, a casualty loss can generally be claimed when a property is damaged by sudden, unexpected or unusual event. Under the new rule, taxpayers can deduct “casualty losses” in the year in which the loss occurs, as long the losses are not compensated by insurance or other parties.
Other considerations are:
- Taxpayers must itemize their federal returns to claim the deduction
- Deductions are allowed only on amounts that exceed $500.00, and on amounts that exceed 10% of the taxpayer’s adjusted gross income for the year.
- Taxpayers who do not have pending claims for reimbursement (and who do not intend to file a claim) can claim the full tax break.
- Taxpayers with pending claims for reimbursement may claim only a loss for 75% of the unreimbursed amount paid for damages.
- Taxpayers can file for an additional deduction or report the income received from a claim in subsequent years depending on how much they actually received
Even though this measure will only benefit those homeowners with the financial means to afford the costly repairs, it is a step in the right direction. After all, most insurance companies have been extremely slow in paying out claims and only a few home builders have voluntarily come forward to replace the bad drywall.
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