IRS Helps Homeowners Impacted With Rotting Drywall

Homeowners experiencing property losses due to certain imported drywall installed in their homes between the years 2001 and 2009 can receive assistance from the Internal Revenue Service.  The corrosive drywall is identified via a two step method published by the Consumer Product Safety Commission and the Department of Housing and Urban Development dated January 28, 2010.

In many situations, this particular imported drywall has caused blackening or corrosion of copper electrical wiring.  It’s also affected the copper components of household appliances and caused sulfur gas odors in the home after the drywall has been installed.  A study completed by the Consumer Product Safety Commission (CPSC) in November of 2009 showed that the air inside 51 homes using the drywall had high levels of hydrogen sulfide and corrosion of metal within the home.

Problems Caused By the Imported Drywall

A family in Birmingham, Alabama experienced high concentration of gases from the Chinese imported drywall installed in their home. The gases have corroded the coils in their air conditioners, corroded pipes on their hot water heater, and corroded their jewelry and silver service. They’ve had increase illnesses and acne which they have never experienced previously.

A man from Texas has complained about a smell in his home for over three years, and just recently found out he has the Chinese imported drywall. The builder admits to using the drywall, but says they didn’t realize it was a problem at the time.  They’ve offered to vent out the chemical and replace the drywall, but the homeowner believes the house is built so poorly that it wouldn’t be livable to do so. He is part of a class action suit.

IRS Revenue Procedure 2010-36 –  the IRS Helps Homeowners Impacted By Drywall

Relief provided by the IRS (Revenue Procedure 2010-36) to homeowners affected by this imported drywall includes:

• The amount paid to repair damages to homes or household appliances as a result of installing the corrosive drywall may be included on the tax return as a casualty loss in the same year the payment was made for the damages.
• If the taxpayer has already filed their tax return during the year they paid for damages caused by the drywall, they have up to 3 years to file an amended return in order to claim the tax deduction.
• The amount of the property casualty loss that can be claimed on the tax return depends on whether the taxpayer is also filing a claim through their property insurance for reimbursement, or is under litigation with the drywall company.  If the taxpayer is not waiting on reimbursement from their insurance or a litigation, 100% of unreimbursed amounts of casualty loss can be deducted on the tax return – including the residence and household appliance damages.  If there is a pending claim or intent for reimbursement, you can claim up to 75% of the unreimbursed amount of damages.  If the taxpayer is 100% reimbursed through insurance or litigation, you may not file a loss on your tax return.

Further details and limitations are described in Revenue Procedure 2010-36 on IRS.gov.