Bipartisan Bill Would Let Scam Victims Deduct Stolen Money
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Tax Relief for Fraud Victims Act (H.R. 9500) was approved by the House Ways and Means Committee on July 1 by a 39-0 vote; the bill would eliminate disaster-related restrictions on theft-loss deductions, waive the 10% early-withdrawal penalty for retirement funds drained by fraud, and let victims deduct losses in the year incurred rather than the year discovered.
- The Tax Cuts and Jobs Act of 2017 suspended personal theft-loss deductions for tax years 2018–2025, limiting them to federally declared disasters, and President Trump's 'big beautiful bill' made that change permanent last year while expanding eligibility to include state-declared disasters.
- FTC data shows consumers reported $15.9 billion in fraud losses in 2025 — the highest on record, up 27% from $12.5 billion in 2024 and nearly 430% higher than 2020 — with imposter scams the most reported category and investment scams causing the largest losses at more than $7.9 billion.
- Adults age 60 and older accounted for $1.6 billion — 68% — of the $2.4 billion in losses reported in that age group in 2024, driven largely by retirement-account cash-outs, according to the FTC's 2025 annual report to Congress.
- An IRS memorandum issued in March 2025 allows investment fraud losses to remain deductible due to the investor's profit motive, but money lost to impersonator, romance, and other non-investment scams is not deductible, leaving victims what AARP's Clark Flynt-Barr called 'victims of the right type of scam.'
- Tax attorney Matthew Roberts of Meadows Collier warned that retirees who lose their retirement funds to fraud often lack taxable income in subsequent years, making it difficult to use the theft-loss deduction under current rules that tie the deduction to the year the fraud is discovered.
- It is uncertain when or whether the full House will consider the measure after the committee vote, leaving the timeline for potential Senate action and enactment unclear.
Why it matters: With reported fraud losses up nearly 430% since 2020 and $1.6 billion of that concentrated in adults 60 and older — many of whom cashed out retirement accounts — the bill targets a tax-code quirk that double-punishes victims: they lose the money, then owe taxes on income they never actually received. Restoring the theft-loss deduction and waiving the 10% early-withdrawal penalty would directly affect retirees who are the fastest-growing fraud-loss demographic.
