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Tax Relief Sought for Chinese Drywall Victims

Jun 22, 2009 | Parker Waichman LLP Victims of defective Chinese drywall should get tax relief, some U.S. lawmakers say.  According to a report on, the lawmakers have asked the Internal Revenue Service (IRS) to allow homeowners to deduct Chinese drywall-related losses on their federal income-tax returns.

Homeowners in several states have complained that fumes from Chinese-made drywall produce a “rotten eggs” odor and cause metals, such as air conditioning coils, to corrode. The fumes have also been associated with respiratory and sinus problems in some residents. According to a recent Wall Street Journal article, the U.S. imported roughly 309 million square feet of drywall from China during the housing boom from 2004 to 2007.

Last month, the Environmental Protection Agency (EPA) released results of tests it conducted that compared Chinese drywall to American-made material. The tests found sulfur and two organic compounds associated with acrylic paint in the Chinese drywall that were not present in the American wallboard. The agency said more testing is needed to determine if any of the compounds found in the Chinese drywall are responsible for problems reported by homeowners.

The Chinese drywall problem is proving costly for homeowners.   They have had to shell out big bucks to replace things like corroded air conditioning coils, and usually the drywall has to be removed and replaced.   Often homes are uninhabitable, forcing homeowners to pay for an additional rental, while they still must pay a mortgage on an empty home. According to,  the potential losses could reach into the millions of dollars.

Sen. Bill Nelson of Florida, and Sens. Mark R. Warner and Jim Webb, and Rep. Glenn Nye, all of Virginia,  have written the IRS seeking some financial relief for homeowners, said.   They want the IRS to clarify if a section of the tax-code applies to damages from Chinese drywall.  The  section in question allows taxpayers to deduct property losses suffered as a result of an unexpected event, such as a fire or storm, said.

“If this deduction applies, it would help alleviate our constituents’ federal tax burden during this time of crisis," the letter said.

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