Homeowners With a Hidden Flaw Lurking in Their Foundations Could Soon Get a Tax Write-Off

Homeowners could soon be able to get a tax write-off for a foundation-wrecking flaw that could be hiding in their homes.

The House passed a measure that would allow homeowners to claim a casualty loss deduction if they have to repair a home foundation impacted by pyrrhotite, a rare mineral found mostly in the Northeast that is ruinous if it's accidentally used as an aggregate in concrete.

The bill would allow homeowners to retroactively claim that deduction, the same reserved for natural disasters, back through tax year 2021. That could impact tens of thousands of homes, especially in New England, that may require an expensive total foundation replacement.

Connecticut Reps. John B. Larson and Joe Courtney, both Democrats, introduced the measure, the Casualty Loss Dedication Restoration Act. It passed as part of a larger bill providing tax relief for fraud victims. The Senate must approve the measure before it becomes law.

“Thousands of homes in north-central and eastern Connecticut have been plagued with crumbling concrete foundations caused by the mineral pyrrhotite, leaving families with exorbitant repair costs up to the hundreds of thousands of dollars through no fault of their own," Courtney said.

The IRS first issued guidance to allow the casualty loss deduction in 2017. But the Tax Cuts and Jobs Act later that year stopped the deduction in 2021. Since then, homeowners have been on the hook for expensive repairs.

Connecticut responded with a few laws requiring more testing of materials and boosting homeowner protections. Massachusetts, which has a large stock of older homes, is creating more protections, too.

But federal government surveys have since found the mineral could be present far outside of New England. The U.S. Geological Survey found that wide areas of the Mid-Atlantic, South, and West Coast have "permissive" geology where the mineral could form. But there's no full map of where it actually is.

What is pyrrhotite?

Pyrrhotite is a naturally occurring mineral that, when exposed to moisture and oxygen, oxidizes and creates chemical reactions. This process causes concrete to expand and break down, producing sulfuric acid and other substances while the foundation cracks and crumbles.

The bronze-colored mineral looks somewhat like pyrite, or fool's gold. It's found in a lot of New England rock, and so it was included in the aggregate used in foundations of homes from the 1980s until about 2015.

It's not clear how many homes are impacted. The University of Massachusetts Amherst estimated about 2,000 homes in the western and central parts of that state could be among them, thanks to several specific quarries having the material. Larson's office said it believes 35,000 homes could be impacted.

The best fix is to lift the house and replace the concrete foundation entirely. That would cost $100,000 to $250,000, UMass estimated. But many insurance companies don't pay for the damages, because they tend to occur gradually over years, instead of in one event.

"Time and time again, families have had to foot the bill to repair their foundations—damaged through no fault of their own," Larson said in a statement.

Massachusetts sellers are prohibited from waiving a home inspection as a provision of accepting an offer, in a move meant to empower more buyers to understand the risks. Still, Realtor.com® ranks Connecticut and Massachusetts both high in its Lemon Home Trap report. Older homes and a lot of rough seasonal weather have something to do with that.

A solid home inspection—a top-to-bottom examination of a property’s major systems and structure, performed by a licensed inspector before you close on the home—can help homeowners be prepared.