Tax Relief for Fraud Victims Act

Key Points

• The bill removes the current rule that limits personal casualty loss deductions to federally declared disasters only. This means people could once again deduct losses from theft, property damage, or other personal casualties on their taxes, regardless of whether a disaster was declared.
• Fraud victims get a special choice: they can claim their theft loss on their taxes in the year the theft actually happened or the year they discovered it. The bill also extends the deadline to file for a tax refund to at least one year after discovering the loss.
• People who need to pull money from retirement accounts to cover fraud losses would not face the usual 10% early withdrawal penalty. They also get one year from the date they discover the loss to put the money back into their retirement account.
• The bill includes a targeted fix for homeowners whose concrete foundations were damaged by the mineral pyrrhotite, allowing them to claim deductions retroactively for losses going back to tax year 2021. This addresses a well-known problem concentrated in Connecticut.