HARTFORD, Conn. (CBS Connecticut) — Two Connecticut congressmen announced Wednesday they’ve received word that hundreds of homeowners with crumbling foundations will soon be able to seek federal tax relief.
Democratic U.S. Reps. Joe Courtney and John Larson said the Internal Revenue Service has agreed homeowners with foundations deteriorating because of the presence of the iron sulfide pyrrhotite can deduct the cost of repairs from their federal taxes as a casualty loss.
“This is sort of a holiday miracle for a lot of people,” said Brenda Draghi, an Ellington attorney who represents about 250 clients in eastern and central Connecticut affected by the problem.
Current federal tax law allows taxpayers to deduct a casualty loss if they’ve suffered a loss from a fire, flood, theft or another sudden cause. While the pyrrhotite problem can take years to develop, Courtney and Larson argued that repairs should also be deductible, especially since the IRS agreed in 2010 to allow homeowners affected by corrosive Chinese drywall to deduct their losses.
Under the new IRS “revenue procedure,” eligible taxpayers will be able to claim a loss for 75 percent of the unreimbursed repair costs in a given taxable year.
“While there is no silver bullet solution to make up for the loss experienced by these homeowners, today’s announcement by the U.S. Department of Treasury will provide at least some degree of relief for many of them,” Courtney said.
Both Courtney and Larson met with Treasury Secretary Steve Mnunchin in September about the expensive problem, which can cost as much as $200,000 or more to replace a foundation. They’ve been working to obtain the tax relief for nearly 19 months.
The IRS decision affects federal income tax returns filed after Nov. 21.
State lawmakers last month passed a new two-year budget that creates a new nonprofit entity that will distribute grants to help pay for the repair or replacement of deteriorating foundations. It will be funded with $100 million in state bonds over five years.
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