Congress Bill Would Restore Tax Relief for Scam Victims
A House bill aims to let fraud victims deduct theft losses again, reviving a pre-2018 rule stripped by the Tax Cuts and Jobs Act.
A bipartisan bill moving through the House would restore a tax deduction for theft losses that was eliminated under the 2017 Tax Cuts and Jobs Act, offering long-sought relief to Americans who have lost money to scams and fraud schemes. Under current law, most victims of theft cannot deduct those losses on their federal returns — a painful reality compounded by the fact that the IRS may still treat certain stolen or fraudulently obtained funds as taxable income in the year they were received.
Before 2018, the federal tax code generally allowed individuals to claim a deduction for theft losses above a modest threshold, providing at least partial financial relief after devastating losses. The Tax Cuts and Jobs Act suspended that deduction for most taxpayers through 2025, leaving fraud victims with no federal remedy even as financial crimes have surged in frequency and sophistication in the years since.
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The proposed legislation would go beyond simply restoring the old deduction. According to reports, it would also layer in additional relief provisions specifically designed for fraud victims, though the precise mechanics of those added protections are still being worked through the legislative process. Advocates for scam victims argue that the current tax treatment amounts to a double punishment — losing money to criminals while still facing a tax bill on funds that were effectively stolen.
The push for reform comes as romance scams, investment fraud, and cryptocurrency-related theft have cost Americans billions of dollars annually in recent years. Consumer protection groups and tax policy experts have long argued that the law as written is fundamentally unfair, placing an undue burden on some of the most financially vulnerable households. Whether the House bill can advance through a divided Congress and reach the president's desk remains an open question, but its introduction signals growing legislative awareness of the problem.
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