U.S. Representative Jamie Raskin (D-MD) says a Maryland woman who lost her retirement savings to a scam and then was hit with a federal tax penalty on the stolen money shouldn’t be on the hook for the taxes. The incident, and others like it, inspired a tax-relief proposal that passed the House this week.
“When scammers, hucksters and fraudsters cheat our people out of their hard-earned savings, the federal government shouldn’t re-victimize survivors with taxes that only add to the financial and psychological burdens they carry,” Raskin said.
The provisions, developed by Raskin and Reps. Jimmy Panetta (D-CA) and Jim McGovern (D-MA), were incorporated into the Tax Relief for Fraud Victims Act, legislation led by Rep. Tom Suozzi (D-NY). The House passed the bill, which would allow victims of scams and other thefts to claim their losses as federal tax deductions, on a 408–17 vote.
Raskin wrote after the vote: “No one should be taxed by the federal government on money stolen from them by scammers and fraudsters.”
GREAT NEWS: Today the House passed a proposal I led with @RepMcGovern and @RepJimmyPanetta to provide much-needed tax relief to survivors of financial scams and natural disasters. No one should be taxed by the federal government on money stolen from them by scammers and…
— Rep. Jamie Raskin (@RepRaskin) September 16, 2026
The proposal would reinstate the personal casualty and theft-loss deduction for eligible nonbusiness losses in 2026 and provide retroactive relief for fraud-related theft losses incurred from 2021 through 2025.
Congress sharply restricted the deduction beginning in 2018. Under the current rules, personal casualty and theft losses generally cannot be deducted unless they are connected to a federally declared disaster.
That restriction can leave a scam victim owing taxes on money withdrawn from a retirement or investment account even when a criminal took the money.
“Victims of scams and fraud should not be forced to pay federal taxes on money that was stolen from them,” Panetta said, echoing his colleagues. He added that restoring the deduction would ensure victims “aren’t punished twice and can focus on rebuilding their lives.”
[NOTE: A tax deduction would not reimburse victims for the money stolen from them. It would allow an eligible loss to be claimed on a tax return, potentially reducing or eliminating taxes owed as a result of the theft.]
The legislation also applies to certain losses from disasters that were not federally declared.
“Whether it’s a family in Massachusetts whose home is falling apart due to a defective, crumbling foundation, or a senior who lost their hard-earned savings to a scammer, they’ve suffered enough,” McGovern said. “They deserve relief—not a tax bill.”
AARP Senior Vice President of Government Affairs Bill Sweeney said many fraud victims “are shocked to learn they owe the IRS on the money they lost,” adding that the legislation would prevent the tax system from victimizing them again.
[NOTE: House approval does not yet change the tax code. The bill must pass the Senate and be signed by the President.]