Many homeowners in the U.S. sustained damages to their homes from contaminated drywall installations between 2001 and 2008. Commonly known as “Chinese Drywall” damage reported includes blackening or corrosion of copper electrical wiring and copper components of household appliances, as well as the strong odor of sulfer gas.
The IRS has provided a safe harbor method that treats certain damage that resulted from corrosive drywall damage as a casualty loss, and provides a formula for determining the amount of the loss.
Taxpayers who have pending claims, or who intend to file a claim for reimbursement can claim a loss for 75% of the unreimbursed amount paid to repair the damage of a personal residence and household appliances during the tax year. It should be noted however that taxpayers may have an income or additional deduction in subsequent years when the actual reimbursement is received from their insurance carrier.
Even if you don’t have a pending claim, you can still claim all unreimbursed amounts paid during the 2010 tax year to repair damages, however those who have been fully reimbursed before filing a return for the year the loss was sustained are not entitled to claim an additional loss on their 2010 return.
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