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Green Building News

IRS Allows Deduction for Defective-Drywall Replacement

Many homeowners who can afford to make the fixes will be able to deduct the cost of corrosive-drywall replacement and damage caused by off-gassing

Hydrogen sulfide off-gassed by contaminated drywall can quickly corrode metal parts in appliances.
Image Credit: Crew Inspection Services

One of the most unpleasant and expensive construction-material defects in recent memory – tainted drywall that emits hydrogen sulfide – has also been one of the most tenacious legacies of the housing boom, leaving afflicted homeowners with houses they can’t live in, mortgages they still have to service, and financial remedies still a long way off.

This week, however, the Internal Revenue Service issued new rules that could provide relief to at least some of these homeowners. In guidance issued on Thursday, the agency said that these taxpayers would be allowed to deduct the cost of replacement of the drywall and appliances damaged by its corrosive off-gassing. The deductions are limited to taxpayers who have not already been reimbursed by insurers, builders, or other parties. Also, the homeowner must first pay for the appliance and drywall replacements before taking the deductions, which must be identified on an itemized tax return.

If the homeowner has reimbursement claims pending, the deduction is limited to 75% of the repair/replacement costs, although additional deductions can be taken in subsequent years if the reimbursement falls short of the actual repair costs.

Drywall limbo continues

“This is welcome and long overdue news,” Senator Bill Nelson, a Democrat from Florida who has long supported the tax break, told the New York Times. “This tax relief is just another important step to help drywall victims piece their lives back together.”

Relief for homeowners whose houses include the contaminated drywall has been hard to come by, although a few customers have seen progress. In May, news reports highlighted a settlement agreement between Knauf Plasterboard Tianjin and Beazer Homes USA, which identified 50 homes in Florida that it built with the faulty drywall and subsequently targeted for drywall replacement.

Most of the drywall was manufactured in and imported from China during the housing boom, although The News Press in Fort Myers, Florida, reports that investigations are underway to determine weather some domestically produced drywall might also be contaminated. Lawyers involved in the cases, which could involve as many as 140 homes, note that claims against domestic companies would be easier to litigate than those against Chinese companies, which have been known to simply ignore court rulings in the U.S..

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