SARASOTA, Fla. – July 24, 2009 – Homeowners affected by Chinese drywall might be able to claim a tax deduction equal to the loss in the value of their homes triggered by the problematic imported material.
This month, an Internal Revenue Service attorney outlined the possibility that homes with corroded air conditioner coils, blackened wiring and sulfuric smells might qualify for a casualty loss deduction.
Thousands of homes in Florida and across the country are thought to be affected by drywall imported from China, though scientific tests so far don’t make a direct link between the import and the problems homeowners are experiencing, including headaches, nosebleeds and breathing trouble.
As of Thursday, about 500 Florida residents had reported complaints to the Florida Department of Health about problems related to drywall.
Many homeowners are stuck living in the unsavory conditions because they cannot afford to pay rent in addition to their mortgages. Only some builders have offered to pay for repairs. And home insurance companies have not yet responded to owners’ complaints. Lawsuits filed against builders, manufacturers, distributors and suppliers may not be resolved for years.
Claiming the deduction won’t be simple either. In a letter to Florida Sen. Bill Nelson, IRS counsel George Blaine said first the Environmental Protection Agency and Consumer Product Safety Commission will have to find that Chinese drywall is responsible for the problems homeowners are experiencing.
Both agencies have only just begun to investigate the problem. Initial EPA tests show Chinese-made drywall contains sulfur, unlike domestic drywall, and the foreign-made gypsum board also had strontium at 10 times the rate of U.S. drywall.
But the agency drew no conclusions about whether the wallboard’s chemical composition has anything to do with homeowners’ experiences.
If it does, Blaine said federal tax law would allow for a deduction in the amount of the difference between the fair market value of a home immediately before and immediately after the casualty. Homeowners would have to subtract any money they get to address drywall problems from insurance companies or builders. They would not be able to claim costs incidental to the casualty loss, such as temporary housing homeowners may have paid for.
For more details about claiming a casualty loss, visit www.irs.gov/taxtopics/tc515.html.
Copyright © 2009 The Miami Herald
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