Chinese Drywall & Home Inspection Update 10/4/2010

IRS Provides Tax Relief for Homeowners with Corrosive Drywall!

On 9/30/2010, the Internal Revenue Service issued guidance providing relief to homeowners who have suffered losses due to Chinese Drywall.

This guidance provides a "Safe Haven" for homeowners that have Chinese Drywall under section 165(a) of the Internal Revenue Code.  This code normally allows deductions for losses arising from fire, storm, shipwreck, or other casualty, or from theft.  However, the "Safe Haven" provided by the IRS is that losses caused by "Corrosive Drywall" are now allowed under this code. 

The "losses" allowed by the IRS are the reduction in value due to the home containing Chinese Drywall or the expenses incurred by the homeowner to remediate the home.  The IRS has allowed simplification of the casualty loss deduction to permit tax payers to use the cost to repair the damaged property as evidence of the decrease in value of the property.  Losses are excluded when a homeowner has a claim with an insurance company or litigation in court for which there is a reasonable prospect of recovery. 

What does all of this mean?

• 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 (or intends to pursue 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. 

 What should you do if you suspect your home contains Chinese Drywall?

• Obtain an Inspection Report that confirms your home contains Chinese Drywall.  Seek a qualified and experienced Inspector to perform the Inspection. 
• Obtain estimates from a qualified Chinese Drywall Remediation Contractor.  This will determine the amount of your "losses" from corrosive drywall.
• Provide both of these to a Certified Public Accountant for further guidance on deducting the losses. 

Kross Inspectors was the first Home Inspection firm in the country to offer Chinese Drywall Inspections.  With almost 7,000 Inspections performed, our Inspection reports are widely accepted by Courts of Law, Lenders, Insurance Companies, Local Governments, and the IRS. 

To find out more, please call our Chinese Drywall Hotline (877) 496-4662, email Info@krossisnpectors.com, or visit www.krossinspectors.com/chinesedrywall.