A Tax Break for Defective Drywall
Homeowners may be able to deduct damages as a casualty loss.
The IRS is offering some relief for taxpayers with defective imported drywall in their homes. Drywall produced in China has been linked to a rotten egg smell and corroded metal components in homes across the U.S. The Consumer Product Safety Commission (CPSC) has received nearly 4,000 reports from residents in 39 states about problem drywall.
The IRS is allowing homeowners to treat damages from the drywall as a deductible casualty loss. A casualty loss deduction is generally the total of your unreimbursed loss reduced by $100 ($500 for 2009) and further reduced by 10% of your adjusted gross income. You have time itemize to claim a casualty loss.
Here's how it works:
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
--Damages had to occur from imported drywall installed in homes between 2001 and 2009.
--To be considered "corrosive," drywall must meet the CPSC's two-step identification method.
--Taxpayers can claim unreimbursed amounts paid to repair damage to their homes or appliances as a casualty loss.
--The loss must be claimed for the year payments were made. Taxpayers who already filed a return for that year have three years to file an amended return.
--If a taxpayer has a pending insurance claim (or plans to seek reimbursement), the taxpayer may claim a loss for 75% of the unreimbursed amount paid.
--Taxpayers who have been fully reimbursed for repairs may not claim a loss.
Here's an example of how the deduction works: Say you paid $10,000 in 2009 for the drywall repairs, none of which was reimbursed by insurance. You reduce that amount by $500 to get $9,500. Then reduce that amount by 10% of your adjusted gross income. If your AGI is $75,000, 10% is $7,500. You’d subtract $7,500 from the $9,500 to get $2,000. You can deduct $2,000.
For more information about claiming drywall damage as a casualty loss, see Revenue Procedure 2010-36.
-
Americans, Even With Higher Incomes, Are Feeling the SqueezeA 50-year mortgage probably isn’t the answer, but there are other ways to alleviate the continuing sting of high prices
-
Hiding the Truth From Your Financial Adviser Can Cost YouHiding assets or debt from a financial adviser damages the relationship as well as your finances. If you're not being fully transparent, it's time to ask why.
-
How to Manage a Disagreement With Your Financial AdviserKnowing how to deal with a disagreement can improve both your finances and your relationship with your planner.
-
3 Smart Ways to Spend Your Retirement Tax RefundRetirement Taxes With the new "senior bonus" hitting bank accounts this tax season, your retirement refund may be higher than usual. Here's how to reinvest those funds for a financially efficient 2026.
-
5 Retirement Tax Traps to Watch in 2026Retirement Even in retirement, some income sources can unexpectedly raise your federal and state tax bills. Here's how to avoid costly surprises.
-
Paper Tax Filers Face Long Wait as IRS Digitization Effort StallsTax Filing Last April, the IRS launched its Zero Paper Initiative to speed paper tax return processing. The project isn’t going well.
-
Over 65? Here's What the New $6K Senior Tax Deduction Means for Medicare IRMAATax Breaks A new tax deduction for people over age 65 has some thinking about Medicare premiums and MAGI strategy.
-
How to Open Your Kid's $1,000 Trump AccountTax Breaks Filing income taxes in 2026? You won't want to miss Form 4547 to claim a $1,000 Trump Account for your child.
-
In Arkansas and Illinois, Groceries Just Got Cheaper, But Not By MuchFood Prices Arkansas and Illinois are the most recent states to repeal sales tax on groceries. Will it really help shoppers with their food bills?
-
7 Bad Tax Habits to Kick Right NowTax Tips Ditch these seven common habits to sidestep IRS red flags for a smoother, faster 2026 income tax filing.
-
New Bill Would Eliminate Taxes on Restored Social Security BenefitsSocial Security Taxes on Social Security benefits are stirring debate again, as recent changes could affect how some retirees file their returns this tax season.
