The Internal Revenue Service (IRS) is offering relief to taxpayers who have incurred property loss caused by the presence of toxic imported drywall that was installed in their homes between 2001 and 2009.

Revenue Procedure 2010-36 (pdf) enables qualified taxpayers to claim as a casualty loss any damage to homes and provides a “safe harbor” method for calculating the loss amount.

Eligible corrosive drywall must be identified by a two-step process described by the U.S. Department of Housing & Urban Development: first, there must be visual evidence of blackened copper electrical coilings and/or air conditioning evaporator coils; and second, the drywall must have been installed between 2001 and 2009. Additional corroboration of the property’s eligibility for special tax treatment will follow when these two criteria have been met.

According to an IRS news release, the revisions provide:

Individuals who pay to repair damage to their personal residences or household appliances resulting from corrosive drywall may treat the amount paid as a casualty loss in the year of payment.

Taxpayers who have already filed their income tax return for the year of payment generally have three years to file an amended return and claim the deduction.The amount of a loss that may be claimed depends on whether the taxpayer has a pending claim for reimbursement (or intends to pursue reimbursement) of the loss through property insurance, litigation or otherwise.

In cases where a taxpayer does not have a pending claim for reimbursement, the taxpayer may claim as a loss all unreimbursed amounts paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances resulting from corrosive drywall.

If a taxpayer does have a pending claim (or intends to pursue reimbursement), a taxpayer may claim a loss for 75 percent of the unreimbursed amount paid during the taxable year to repair damage to the taxpayer’s personal residence and household appliances that resulted from corrosive drywall.

Homeowners who suspect they have corrosive drywall should file a report with the U.S. Consumer Product Safety Commission by calling (800) 638-2772 or visiting www.cpsc.gov/cgibin/drywall.aspx.

The issue of toxic imported drywall, typically of Chinese manufacture, came light in 2009 amidst widespread reports of electrical failure, sulphuric fumes emissions, and respiratory problems experienced by owners of newly built homes constructed during last decade’s housing boom.

(image source: Wikimedia Commons)