The Official Online Weekly Newspaper of NAHB
The Internal Revenue Service has published guidance for home owners who have suffered losses due to corrosive drywall installation.
Revenue Procedure 2010-36 provides a safe harbor for taxpayers suffering an unreimbursed loss from having to make drywall-related repairs. The guidance makes it clear that losses due to corrosive drywall repair are casualty losses and may be deducted from federal income tax, consistent with the rules of the casualty loss deduction (including the requirement that a deductible loss must exceed 10% of Adjusted Gross Income).
Under the safe harbor, home owners who are not seeking and do not intend to seek reimbursement for damages may claim 100% of the repair expense as a tax deduction. Home owners who have a pending claim for reimbursement may only claim a deduction equal to 75% of the damage amount.
Depending on the actual future reimbursement, the taxpayer may have to adjust the effective deduction amount by reporting income or additional deduction amounts. Home owners who are fully reimbursed for the loss may not claim a deduction.
Home owners claiming the deduction should use IRS Form 4684 and mark “Notice 2010-36” on the top of the form. Taxpayers should claim the deduction in the year of the expenditure related to the loss and are permitted to file amended returns for prior tax returns no older than three years.
For more information, e-mail Robert Dietz at NAHB, or call him at 800-368-5242 x8285.