H.R. 9500: Tax Relief for Fraud Victims Act

This bill would change federal tax rules for certain losses caused by disasters and fraud.

What it would change

• Removes a current limit on deducting personal casualty losses. Under current law, taxpayers can only deduct certain personal losses from events like disasters if they meet a special limitation. The bill would repeal that limitation.
• Makes some theft losses easier to claim on taxes. If someone loses money or property because of theft, the loss is generally treated as occurring in the year the person discovers it. The bill would let taxpayers who were victims of theft involving fraud, deceit, or misrepresentation choose to treat the loss as occurring in the year the loss actually happened instead.
• Extends the time to file refund claims for those losses. For qualifying theft losses involving fraud, deceit, or misrepresentation, the bill would give taxpayers at least one year after discovering the loss to file for a refund or credit, and would remove one existing limit that can reduce refund amounts in some cases.
• Allows certain retirement-plan withdrawals tied to fraud losses to avoid the usual early-withdrawal penalty. The bill would add an exception to the 10% early distribution tax for distributions connected to qualifying theft losses involving fraud, deceit, or misrepresentation. It would also allow those distributions to be repaid under rules similar to existing disaster-related repayment rules, with the repayment window tied to when the taxpayer discovers the loss.
• Creates special retroactive relief for certain foundation-damage losses in Connecticut and nearby areas affected by pyrrhotite. For “pyrrhotite-related personal casualty losses” involving damage to a principal residence from a deteriorating concrete foundation, the bill would apply the casualty-loss change using an earlier cutoff date, effectively extending relief back to losses sustained after December 31, 2020. It would also extend the time to file refund claims for those losses.

When the changes would apply

• Most of the tax changes would apply to losses in tax years beginning after December 31, 2025.
• The retirement-distribution change would apply to distributions made after December 31, 2025.
• The special pyrrhotite-related rules would apply retroactively as described in the bill.

Relevant Companies

None found