“Dear Helen:

We recently bought a ten-year old house.  After moving in, we hired a carpenter to replace a warped window.  Upon removing it, he discovered that the surrounding wood was rotten.  Further investigation revealed that during the original construction, the flashing at the roofline had been installed improperly.  When it rained, instead of running down the outside of the clapboards, water ran down between the clapboards and the foam insulation, rotting the wood.  In addition, one rotted post in the attic had become home to a family of carpenter ants.  The total cost of repairs raised the price of an expected $1500 job into over $10,000!

Our home insurance won’t cover the damage, since the only coverage for rot is when it is caused by a single event and not gradually over time.

Is there any other way to recoup some of this unplanned expense!?”

– Rotten Luck

What a horrible experience!

You might be eligible for the Federal Tax Credit for Energy Efficiency.  For replacement windows, doors, and insulation, it covers 30% the cost of the product but does not cover the cost of installation.  The maximum credit is $1500.  The new windows need to meet certain efficiency criteria.  See the official website for details.  You’ll claim the credit next spring when you file your taxes.

Casualty losses can be deducted from your income tax (Schedule A: Itemized Deductions, Line 20).  Unfortunately, the IRS requires that “the damage must be caused by a sudden, unexpected or unusual event like a car accident, fire, earthquake, flood or vandalism.”  So, unfortunately, your expenses would be disallowed for reasoning similar to your insurance company.

If you had your home inspected prior to purchase, this problem should have been discovered.  In Massachusetts:

Home Inspectors are required to carry a minimum of $250,000 in insurance so that consumers will be able to seek compensation if they endure losses that are a result of an inspector’s error.

I would confer with an attorney about what might be required to pursue this option.

Good luck to you, Rotten.  Now that your home is repaired, I hope you have many happy years in it.

Disclaimer: The information provided is for educational and informational purposes only.  The information provided does not constitute financial, tax, or legal advice by Affine Financial Services for any individual or couple.   Affine Financial Services does not assume any responsibility for the accuracy of the information provided.  Each individual and couple should seek the advice of his or her own attorney, accountant, or financial advisor regarding the advisability of any action for their particular situation.

Image credit: Velo Steve at Flickr

Tags: home insurance, tax deduction, termites

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