IRS To Allow Deduction For Chinese Drywall Problem

Image via WikipediaHere in South Florida we have a big problem with many homes being built with toxic drywall manufactured in China. It emits a higher level of sulphur than regular drywall and corrodes metal, causing problems for air-conditioners and other electronic equipment. 
 
To make matters worse many homeowners have complained that the fumes have made them sick. The federal government hasn't been able to link the drywall to their illnesses, but has recommended that homeowners replace the drywall and wiring, a process that can cost more than $100,000. 
 
Complaints about the drywall started a few years ago with many of them in Florida and Louisiana. The problem is worse because homeowners must still pay their mortgages on the damaged homes while also paying for temporary accommodations, while their homes are uninhabitable. 
 
Of course many lawsuits have been filed but the process is long and drawn out. The good news is the IRS has created a tax deduction for these homeowners. Under the new rules taxpayers can deduct the casualty losses ( the cost of repairs from a sudden and unusual event) in the year in which the loss occurs as long as the losses are not covered by insurance or other parties. The restrictions are that they must itemize their federal returns. And deductions are only allowed on amounts exceeding $500 and on amounts that exceed 10 percent of the taxpayer's adjusted gross income. 
 
Taxpayers who have pending insurance claims can take advantage of the plan but must later report it as income if reimbursed later. 
 
At the present time most homeowners have gotten no relief from any source. This tax relief will only help people who have the money or can borrow it for the repairs. 
 
Many homes in my area are new construction and are built with the toxic drywall. They are just sitting there either unoccupied or never sold. They are just waiting on lawsuits and insurance claims. This problem just adds to the foreclosure problem, overbuilding and excessive inventory in South Florida. These problems contribute to the depressed prices here. This also leads to property values not being high enough to qualify for mortgages, aggravating the home sales market. 
 
These problems along with the foreclosure process at a dead stop will only prolong the borderline depression here. At least this IRS help will help some homeowners rebuild at get the housing inventory selling. With many homeowners facing these many challenges, believe it may take a decade to come out of these problems.