House passes bipartisan invoice providing fraud victims tax aid
House-passed measure would let fraud victims deduct losses and waive early-withdrawal penalties on stolen retirement funds.
The U.S. House of Representatives have overwhelmingly voted to advance laws that might spare fraud victims from paying taxes on retirement financial savings stolen out from beneath them, a measure monetary advisor teams say has been years late.
The Tax Relief for Fraud Victims Act (H.R. 9500) cleared the House by a vote of 408-17, sending the invoice to the Senate as lawmakers on each side of the aisle regarded to shut a spot within the tax code that has left rip-off victims dealing with IRS payments on cash they by no means really saved.
Under present legislation, the deduction for private casualty and theft losses is basically off the desk except the loss stems from a federally declared catastrophe – a state of affairs that has meant added monetary ache and insult to harm for many victims of funding scams, romance schemes, and identification theft.
H.R. 9500 would repeal that disaster-linked restriction particularly for losses tied to fraud, deceit or misrepresentation, and would let victims deduct losses exceeding 10% of their adjusted gross earnings within the yr the fraud occurred or was found.
The invoice additionally proposes so as to add a brand new exception beneath the Internal Revenue Code that might enable penalty-free retirement account withdrawals related to fraud-related theft losses, and it extends the window for victims to file amended returns and search refunds. Relief would apply retroactively to losses incurred after December 31, 2020.
Republican Representative Max Miller from Ohio, who sponsored the invoice, has pointed to the dimensions of the issue driving the laws. In 2025 alone, losses from cyber-enabled crime amounted to just about $21 billion, together with $7.7 billion impacting seniors over 60.
The Certified Financial Planner Board of Standards put the broader toll even higher, saying Americans misplaced $68 billion to monetary scams final yr – roughly $186 million a day – because it applauded the bipartisan group of sponsors behind the invoice, together with Miller, Rep. Tom Suozzi (D-N.Y.), Rep. Greg Steube (R-Fla.) and Rep. Jamie Raskin (D-Md.)
Trade teams representing monetary advisors moved rapidly to press the Senate to take up the invoice. The Financial Services Institute, which represents impartial broker-dealers and advisors, stated the present tax remedy compounds the harm fraud already does to victims.
“Victims of economic fraud shouldn’t face an extra tax burden after already struggling vital monetary losses,” stated FSI President and CEO Dale Brown, who added that the group “urge[s] the Senate to take up this invoice and act rapidly to offer much-needed aid to fraud victims.”
CFP Board was equally blunt in regards to the stakes, noting that its certificants typically function “monetary first responders” for purchasers whose funds have been upended by fraud. Its assist for H.R. 9500 is a part of a broader anti-fraud marketing campaign it has run for a lot of the previous yr.
Last September, it cited “combatting and defending victims from fraud and monetary exploitation” beneath its formal public policy priorities, falling inside the broader umbrella of shopper safety. More just lately in June, the credentialing physique mark submitted a letter of assist backing the invoice on to the House Ways and Means Committee, following that up with related letter of assist when the committee pushed it to a flooring vote in July.
H.R. 9500 now heads to the Senate, the place a companion effort has drawn assist prior to now however has not all the time cleared the chamber earlier than a session ends. With the Senate anticipated to interrupt for the midterm elections in early October, the invoice now faces an unsure timeline to be formally ratified and promulgated into legislation.
