Washington, D.C.— Today, the U.S. House of Representatives passed key provisions of a bill led by Representatives Jamie Raskin (MD-08), Jimmy Panetta (CA-19) and Jim McGovern (MA-02) to provide tax relief to Americans who fall victim to financial scams or natural disasters. The provisions were passed as part of legislation led by Representative Tom Suozzi (NY-03).
The proposal eliminates the “scam tax” which taxes Americans on income or assets stolen from them, even if they no longer possess those funds, by reinstating the Nonbusiness Casualty and Theft Loss Deduction for 2026. Crucially, the lawmakers also secured retroactive relief for victims scammed between 2021 and 2025.
“I first introduced this bill when my constituent was scammed out of her retirement savings, only to be hit with a massive federal tax penalty on that stolen money. 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,” said Rep. Raskin. “Our proposal reinstates critical financial relief to Americans like my constituent, and there are huge numbers of people in her situation.”
“Victims of scams and fraud should not be forced to pay federal taxes on money that was stolen from them,” said Rep. Panetta. “By passing this bipartisan legislation, the House took an important step toward correcting that injustice and restoring a key tax deduction so victims aren’t punished twice and can focus on rebuilding their lives. I’m proud to have helped secure the inclusion of provisions from our Tax Relief for Victims of Crimes, Scams, and Disasters Act that would extend this relief retroactively to Americans who have already suffered financial losses.”
“It’s outrageous that victims of scams, fraud, or disaster are being punished by the IRS for something that wasn’t their fault,” said Rep. McGovern. “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. They deserve relief—not a tax bill. Housing and affordability are a major focus for my district. That's why this bill is about fairness as it restores a commonsense tax deduction that will provide my constituents the relief they not only need but deserve, and help so many recover, rebuild, and move forward.”
“Many victims of fraud are shocked to learn they owe the IRS on the money they lost,” said Bill Sweeney, Senior Vice President of Government Affairs at AARP. "Your legislation will do so much to help prevent victims of fraud from feeling re-victimized again by the IRS on the losses they experienced.”
The lawmakers’ proposal reinstates the Nonbusiness Casualty and Theft Loss Deduction, which was eliminated in 2018, allowing survivors of scams and natural disasters to deduct financial losses from their taxes
Since the inception of formal federal income tax in 1913, the federal government has abided by the principle that victims of crimes or disasters should not be revictimized by the tax code on income they no longer possess.
The lawmakers initiated this proposal as part of legislation they introduced in the 118th and 119th Congresses, after hearing from constituents who were forced to pay thousands of dollars in taxes after falling victim to a financial scam or natural disaster. The proposal will also provide relief to survivors of non-federally declared disasters.
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