IRS extends tax break for crumbling foundation repair costs

An excerpt from the IRS document allowing homeowners with crumbling foundations caused by pyrrhotite to deduct the cost of repair from their federal taxes.

Washington – In a new decision, the Internal Revenue Service will allow Connecticut homeowners with crumbling foundations to take a federal tax deduction for the cost of any repair made before 2021.

“Connecticut homeowners with crumbling foundations can breathe easier tonight knowing they’re getting significant longer-term federal relief to repair their homes,” Sens. Richard Blumenthal and Chris Murphy said in a joint statement. “We’ve seen the emotional and financial devastation that crumbling foundations have caused Connecticut homeowners, and they deserve every bit of this relief.”

Reps. John Larson , D-1st District, and Joe Courtney, D-2nd District, were successful in lobbying Treasury Secretary Steven Mnuchin and IRS officials to allow repairs to crumbling foundations to be considered tax deductible casualty losses.

But that IRS determination came just weeks before Congress passed a federal tax overhaul that eliminated the deductibility of most casualty losses, including those incurred from crumbling foundations.

The IRS has now decided to allow Connecticut homeowners with crumbling foundations to deduct qualified home repairs through December 2020 – but to do so they would have to amend their 2017 tax filings.

Capitol Region Council of Governments

A map showing the where most of the crumbling foundations are.

“The (deduction) 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. 216-45″ – a state law concerning crumbling foundations, the IRS guidance says.

“This is welcome news for homeowners in our districts,” said Larson and Courtney in a joint release with Rep. Richard Neal, D-Mass. “The additional three years afforded under this updated policy provides critical time for more homeowners impacted by crumbling foundations to make repairs and secure federal tax relief.”

The lawmakers said that since enactment of the new tax law in December, they “have been in regular contact with officials from the Treasury and IRS to explore ways to extend as much relief as possible to homeowners in spite of the changes made by the law.”

“We are grateful for their attention to our concerns and the support they have provided today to homeowners struggling with the damage caused by crumbling foundations,” the lawmakers said.

The IRS said the tax relief also will be available to homeowners outside Connecticut who qualify.

But for anyone to take the deduction, damage to their foundations must be determined to be the result of the presence of the mineral pyrrhotite.

Homeowners in three dozen towns in north-central and northeastern Connecticut have foundations built with concrete that contained pyrrhotite from a quarry in Willington. Pyrrhotite expands with moisture, causing foundations to bow and crack, damage that is often not covered under a homeowner’s insurance policy.

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