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House Passes Bill to Restore Tax Deduction for Financial Fraud Victims

Posted on October 5th, 2026 at 1:10 PM
House Passes Bill to Restore Tax Deduction for Financial Fraud Victims

From the desk of Jim Eccleston at Eccleston Law

Victims of financial fraud may soon receive additional tax relief under legislation that overwhelmingly passed in the House of Representatives.

The bipartisan Tax Relief for Fraud Victims Act, H.R. 9500, passed the House by a 408-17 vote. The bill would restore the Section 165(a) tax deduction for personal casualty and theft losses and remove restrictions that currently limit when taxpayers may claim those losses. The legislation now awaits Senate consideration, as reported by InvestmentNews.

Congress restricted the Section 165(a) deduction beginning in 2018 as part of the 2017 tax law. The changes left most financial fraud victims unable to claim the deduction, apart from narrow exceptions that include certain investment fraud losses.

H.R. 9500 would restore the deduction for fraud losses and provide several additional forms of relief. The bill would waive the 10 percent penalty on certain early 401(k) distributions, extend the deadline for filing refund claims, reduce certain limitations on refund amounts and give taxpayers one year from discovering a theft loss to repay early distributions.

According to InvestmentNews, the CFP Board supports the legislation, which Reps. Max Miller, an Ohio Republican, and Thomas Suozzi, a New York Democrat, co-sponsored.

InvestmentNews reports that the CFP Board estimates that Americans lost $68 billion to financial scams in 2025. The organization said the actual figure may be higher because some victims do not report losses due to embarrassment.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, financial fraud, tax relief, securities law, investor protection

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