IRS extends tax break for repairing concrete damage
The Internal Revenue Service is giving homeowners whose homes were damaged by deteriorating concrete foundations more time on a safe harbor it issued last year.
Last November, the IRS issued a revenue procedure providing a safe harbor that allows individual taxpayers to deduct the amounts paid to repair damage to their personal residences caused by deteriorating concrete foundations containing the mineral pyrrhotite. In Revenue Procedure 2017-60, the IRS noted that residents in the Northeast have reported problems with certain residential concrete foundations.
Revenue Procedure 2018-14, which the IRS issued Wednesday, extends the time for individuals to pay to repair damage to their personal residences. Most importantly for affected homeowners, for damage prior to 2018, if a taxpayer pays to repair the damage prior to the last day for filing a timely Form 1040X for the 2017 taxable year, the taxpayer may treat the amount paid as a casualty loss on a timely filed form 1040X for the 2017 taxable year.
The IRS noted that the safe harbor under the revenue procedure is available to a taxpayer who has obtained a written evaluation from a licensed engineer indicating that the foundation was made with defective concrete, and has requested and received a reassessment report that shows the reduced reassessed value of the residential property based on the written evaluation from the engineer and an inspection pursuant to Connecticut Public Act No. 16-45. The safe harbor also is available to a taxpayer whose personal residence is either in Connecticut or outside of Connecticut, provided the taxpayer has obtained a written evaluation from a licensed engineer indicating that the foundation was made with defective concrete containing the mineral pyrrhotite.
In August 2015, the Connecticut Attorney General and the state’s Department of Consumer Protection began investigating complaints by homeowners concerning the deterioration of their concrete foundations. They issued a report in December 2016 that found the deterioration of the concrete foundations was caused by the presence of pyrrhotite in the concrete mixture used to pour the foundations. Pyrrhotite is a naturally existing mineral in the stone mixture used to produce concrete. It oxidizes in the presence of water and oxygen, leading to the formation of expansive mineral products and causing concrete to deteriorate prematurely. Under a Connecticut law, state residents with deteriorating concrete foundations can ask for a reassessment of the assessed value of their homes based on a written evaluation from a licensed engineer indicating the foundation was made with defective concrete.