Chinese drywall research needed to trigger federal tax deductions July 30, 2009

Headaches, nosebleeds, and respiratory problems aside, the federal government may be willing to give some homeowners a tax deduction based on a decline in home value – if the home contains tainted Chinese drywall.  According to IRS counsel George Blaine, both the Environmental Protection Agency and the Consumer Product Safety Commission must find a conclusive link between the symptoms experienced by homeowners and the installed Chinese drywall before any tax deduction can be triggered.  This has yet to occur.

The research needed to trigger the federal tax law has only just taken flight.  Initial tests do, however, show indications of potentially hazardous levels of strontium and sulfur.  No conclusions by either agency have been released.

If the federal tax law is in fact triggered, homeowners would be permitted to deduct an amount equal to the difference between the fair market value (FMV) at the moment before and the moment after the drywall was installed.  In other words, homeowners would take figures based on a “snapshot” in time, both before and after the (or with vs. without) the drywall.  The deduction would be aimed at helping victims recover the cost to remove the drywall and re-install a safe product.  Additional factors such as clean-up, sterilization, labor costs, etc… may or may not be included.

Across the country, thousands of homeowners may be living in dangerous conditions.  Some construction companies have offered to fix homes with tainted drywall, however, many have not.  Homeowners without privity to a willing builder for wall replacement may find their situation complicated due to rising unemployment rates.  The incentive, and ability, is often simply not there when it comes to the prospect of paying rent to live in safe quarters in addition to maintaining timely mortgage payments.

Homeowners will hopefully see the federal tax law become available as research progresses, but they can take actively exercise their rights by contacting one of several leading groups of attorneys who are tackling this matter head-on.