HARTFORD, CT — Homeowners with crumbling foundations will be able to carry back two years and forward 20 years their “net operating loss” from repairing their foundations, according to new IRS guidance.
Simply put it means homeowners who identified their losses to local tax assessors before Jan. 1, 2018 will be able to get back what they’ve paid in federal taxes to help cover the cost of repairs—even if that loss exceeds their annual tax liability.
The cost of repairing a home that’s crumbling due to a high concentration of pyrrhotite will cost on average $150,000 to repair, but can be much more.
“If you can only use that loss in one year for people of more modest income and modest annual tax rates really has a much skimpier value,” U.S. Rep. Joe Courtney said Tuesday at a Legislative Office Building press conference.
The press conference was to announce to new guidance from IRS Commissioner Charles Rettig, which allows homeowners to spread the cost of the repairs for the property loss over several years.
Secondly, the IRS has clarified that homeowners can claim up to 100 percent of their annual tax liability against their casualty loss, despite the GOP tax law that was signed in December 2017 and limited claims to 80 percent.
Courtney said the Connecticut Society of CPA’s was instrumental in producing this information about whether or not homeowners can carry forward that loss in subsequent years because it would be impossible for a homeowner to deduct the total amount of their property casualty loss in one year.
“It allows people with more modest means access to the benefit,” Courtney said.
Courtney said he knows this relief doesn’t help everyone, but he knows a person in Vernon who got $30,000 back in taxes last year as a result of this provision.
“This has value. There’s no question about it,” Courtney added.
But he warned people to consult with their tax preparer because there are some very specific rules and schedules regarding the “net operating loss” carryforwards.
In November 2017, the IRS approved deductions related to crumbling foundations, but the tax law signed into law in December 2017 repealed the casualty loss deduction going forward.
However, homeowners in Connecticut and Massachusetts who have reduced the value of their homes due to this problem before Jan. 1, 2018 will still be able to write off the cost of the repairs now over a period of 20 years.
“As long as the loss was identified by the town assessors office,” Courtney said. “They still fall within the safe harbor of the initial tax procedure.”
Bonnie Stewart, president of the Connecticut Society of CPA’s, said there have been hundreds of people who have identified the loss, but this provision gives them the money to move forward and make the repairs.
An IRS webinar on the guidance regarding the rules for claiming casualty losses related to crumbling foundations will be held at 10 a.m. Wednesday, Oct. 24.
To register for the webinar please go to https://www.webcaster4.com/Webcast/Page/1151/27592