Congress Bill Seeks Tax Relief for Fraud and Scam Victims
A House bill would restore pre-2018 theft-loss deductions and add new relief for Americans who lose money to scams.
A bipartisan push in the House of Representatives aims to end a painful financial double-blow for scam victims: losing money to fraud and then owing taxes on it. The proposed legislation would restore a deduction for theft losses that was effectively eliminated by the 2017 Tax Cuts and Jobs Act, which took effect in 2018, and would layer on additional relief measures specifically designed for fraud victims.
Under current law, most individuals who suffer theft or fraud losses cannot deduct those amounts on their federal returns unless the loss is tied to a federally declared disaster. That restriction, introduced as part of the sweeping 2017 tax overhaul, left ordinary scam victims with no way to offset the financial damage on their tax bills — even when the IRS treats recovered or forgiven amounts as taxable income in subsequent years.
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The stakes are significant. Fraud losses in the United States run into the billions of dollars annually, and victims often discover that their nightmare does not end when the crime is reported. In some cases, money that was stolen but later partially recovered — or debt forgiven as part of a settlement — can trigger unexpected tax obligations, compounding the original harm.
The House bill would roll back the clock to the pre-2018 framework, generally permitting taxpayers to claim deductions for theft losses, and would introduce further protections designed to prevent fraud victims from facing tax liability on money they never truly received or kept. Advocates for scam victims say the current rules are both unjust and out of step with the financial reality facing millions of Americans targeted by increasingly sophisticated fraud schemes.
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