Homeowners May Get Tax Write-Off for Foundation Flaws

Homeowners facing costly foundation repairs due to a specific mineral flaw may soon be eligible for a tax deduction. The U.S. House of Representatives has passed a measure, the Casualty Loss Dedication Restoration Act, which would permit homeowners to claim a casualty loss deduction for foundation damage caused by pyrrhotite. This rare mineral, when used as an aggregate in concrete, can lead to the deterioration of foundations. The bill allows for retroactive claims, dating back to the 2021 tax year, mirroring deductions typically reserved for natural disasters. This legislative action could impact tens of thousands of homes, particularly in the Northeast region of the United States, where extensive foundation replacements costing hundreds of thousands of dollars may be necessary.

The measure was introduced by Connecticut Representatives John B. Larson and Joe Courtney, both Democrats, and was included as part of a larger tax relief bill for fraud victims. For the bill to become law, it must also be approved by the Senate. Representative Courtney highlighted the plight of families in north-central and eastern Connecticut, whose homes have been affected by crumbling concrete foundations due to pyrrhotite, resulting in substantial repair expenses incurred through no fault of their own. The Internal Revenue Service (IRS) had previously issued guidance in 2017 to allow for casualty loss deductions related to such foundation issues. However, the Tax Cuts and Jobs Act enacted later that year subsequently halted this deduction starting in 2021, leaving homeowners responsible for these significant repair costs.

In response to the growing problem, several states have taken legislative action. Connecticut has implemented laws mandating more rigorous testing of construction materials and enhancing protections for homeowners. Massachusetts, a state with a considerable stock of older homes, is also developing additional protective measures. Furthermore, surveys conducted by the U.S. Geological Survey suggest that the presence of pyrrhotite may extend beyond New England. Federal surveys have identified "permissive" geological areas in the Mid-Atlantic, Southern, and West Coast regions where the mineral could potentially form, although a comprehensive map detailing its actual distribution is not yet available. Pyrrhotite is a naturally occurring mineral that, when incorporated into concrete aggregate, can react with moisture and oxygen, leading to expansion and structural damage over time.