Casualty Loss Deduction - Crumbling Foundations

[sgmorelli56]

IRS Revenue Procedure 2017-60 provides a safe harbor for the reporting of casualty losses related to crumbling foundations in NE CT due to the presence of excessive pyrrhotite in the concrete.  How do I include these expenses in TurboTax?  Do I need to do this manually?

[KristinaK]

According to U.S. Code Section 165, any personal casualty loss is not deductible for the years 2018 through 2025. Unless the loss is attributable to a Federally declared disaster area. 

Since casualty losses due to "deteriorating concrete foundation" do not fall under that description, you will not be able to deduct the loss on your 2019 tax return. 

However, here are the instructions on how you would normally do it. 

In TurboTax, jump to the entry area for casualty loss:

1. Open your return. (To do this, sign in to TurboTax and open or continue your return.)
2. Search for casualty loss and select the Jump to link in the search results.
3. On the Damaged or stolen screen, select Yes.
4. Answer the interview questions describing your event.

If you were to take this deduction, you would have to print and mail your tax return since the generated Form 4684 must be marked "Revenue Procedure 2017-60" at the top of the form. 

[sgmorelli56]

Thanks for the reply.  I would agree that normally, a crumbling foundation would not qualify as a casualty loss under current rules.  However, the IRS in Rev. Proc. 2017-60 provides additional tax relief to homeowners with crumbling foundations under certain circumstances.  The Treasury Dept. and the IRS concluded that it is appropriate to provide a safe harbor method that treats certain (pyrrhotite) damage resulting from deteriorating concrete foundations as a casualty loss and provides a formula for determining the amount of the loss.  The IRS will not challenge the taxpayer's treatment for a loss falling within the scope of the revenue procedure (Section 2, paragraph 10).

I was really looking for how to enter the information into Turbo Tax which you addressed.  It appears Turbo Tax does not address this in the software directly.  Thanks for your assistance.

[DawnC]

You are welcome.  

A video I found on the IRS site is here.  

[steverickenbacher1157]

Did you get an answer on how to enter in turbo tax for casualty loss from deteriorating foundation?

[Anonymous]

the problem is that tax law changes effective for the years 2018-2025 bar personal casualty losses unless attributable to a federally declared disaster.  (an exception if there are casualty gains then casualty losses can be used to offset them)  also see PUB 547https://www.irs.gov/pub/irs-pdf/p547.pdf 

thus deteriorating foundations that would have qualified Qualified disaster loss. A qualified disaster
loss is an individual’s casualty or theft loss of
personal-use property that is attributable to a
major disaster declared by the President under
section 401 of the Stafford Act in 2016, as well
as from Hurricane Harvey, Tropical Storm
Harvey, Hurricane Irma, Hurricane Maria, or
from the California wildfires in 2017 and
January 2018.

A qualified disaster loss is now expanded to
include an individual’s casualty and theft of
personal-use property that is attributable to a
major disaster that was declared before
February 19, 2020, by the President under
section 401 of the Stafford Act and that
occurred in 2018 and before December 21,
2019, and continued no later than January 19,
2020. However, this change does not include
those losses attributable to California wildfires
in January 2018 (which received special relief in
2018).
thus losses from crumbling foundations are not deductible for 2018-2025

[steverickenbacher1157]

Sorry to disagree but there is a deduction for crumbling foundations.  If you look on page 4 of the Publication 547 you have linked you will find this:

Special Procedure for
Damage From Deteriorating
Concrete Foundation
Under a special safe harbor procedure, you can
deduct the amounts you paid to repair damage
to your home caused by a deteriorating concrete foundation containing the mineral pyrrhotite. Under this procedure, you treat the
amounts paid as a casualty loss in the year of
payment for amounts paid prior to 2018. See
the note below for amounts paid after 2017.

[Opus 17]

Thank you for that quote, but you didn’t read far enough.

Amounts paid in 2018 or 2019 after filing an original 2017 tax return and before the last day to file a timely Form 1040-X for the 2017 tax year are treated as a casualty loss on a timely filed Form 1040-X for the 2017 tax year (under a special rule applicable for repairs to deterio- rating concrete foundations.

If you paid for repairs in 2018 or 2019, you take the casualty loss by filing an amended 2017 tax return.  Publication 547 has not been revised for 2020 tax returns yet, but I would assume that the same rules would apply, if you paid expenses in 2020 for deteriorating concrete repairs, you would take the casualty lost by filing an amended 2017 return, not on your 2020 return. An amended 2017 return must be filed by April 15, 2021.

[steverickenbacher1157]

Correct, you have to file an amended 2017 tax return, which I just completed. Unfortunately no ruling (to the best of my knowledge) has been made yet on extending this to 2020...I hope they do as their are several homeowners still unware that they have this issue.  

My question was how to get this casualty loss entered into TurboTax.  You can take the safe harbor procedures but I didn't see this as an option in Turbo Tax.  I ended up entering the amount I paid out of pocket as the fair market value before the casualty and put $0 as the fair market value after the casualty and ended up crossing these off the form 4684 as it is my understanding the safe harbor amount should be listed directly on line 7 and put "Revenue Procedure 2017-60" at the top of the form, which I entered manually.  

[Opus 17]

When preparing an amended return in TurboTax 2017 installed on your own Mac or pc, you can make direct entries by switching to Forms mode and making manual entries directly on the form using the “override” command.  TurboTax doesn’t support adding messages to the top of the form so you would still have to do that by hand after printing the finished amended return and before mailing.