Bill Aims to End Taxes on Scam Victims' Stolen Money
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- Scam victims face tax liability on stolen funds due to the Tax Cuts and Jobs Act of 2017, which restricted theft loss deductions and was made permanent under President Trump's 'big beautiful bill' last year.
- H.R. 9500, the Tax Relief for Fraud Victims Act, would eliminate disaster-related limitations on theft loss deductions and allow victims to deduct losses in the year they occurred, not when discovered.
- House Ways and Means Committee approved the bill 39-0 on July 1, though it remains uncertain when or whether the full House will take it up.
- FTC data shows reported fraud losses reached $15.9 billion in 2025, a 27% increase from 2024 and nearly 430% since 2020, with imposter and investment scams causing the most damage.
- AARP notes that adults 60 and older are increasingly losing $100,000 or more, often from retirement accounts, making the current tax treatment especially harmful due to lack of future taxable income.
- IRS rules do not allow deductions for losses from romance or impersonator scams, though investment fraud losses may still qualify, creating an inequity that advocates call 'frustrating'.
Why it matters: Victims who lost retirement savings to scams could avoid steep tax penalties and gain back thousands in deductions if the bill passes, while the IRS and Treasury would lose revenue from taxing stolen money—highlighting a growing mismatch between tax policy and rising fraud trends affecting older Americans.
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