House passes bipartisan bill offering fraud victims tax relief

The U.S. House of Representatives have overwhelmingly voted to advance legislation that would spare fraud victims from paying taxes on retirement savings stolen out from under them, a measure financial advisor groups say has been years past due.

The Tax Relief for Fraud Victims Act (H.R. 9500) cleared the House by a vote of 408-17, sending the bill to the Senate as lawmakers on both sides of the aisle looked to close a gap in the tax code that has left scam victims facing IRS bills on money they never actually kept.

Under current law, the deduction for personal casualty and theft losses is largely off the table unless the loss stems from a federally declared disaster – a state of affairs that has meant added financial pain and insult to injury for most victims of investment scams, romance schemes, and identity theft.

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H.R. 9500 would repeal that disaster-linked restriction specifically for losses tied to fraud, deceit or misrepresentation, and would let victims deduct losses exceeding 10% of their adjusted gross income in the year the fraud occurred or was discovered.

The bill also proposes to add a new exception under the Internal Revenue Code that would allow penalty-free retirement account withdrawals connected to fraud-related theft losses, and it extends the window for victims to file amended returns and seek refunds. Relief would apply retroactively to losses incurred after December 31, 2020.

Republican Representative Max Miller from Ohio, who sponsored the bill, has pointed to the scale of the problem driving the legislation. In 2025 alone, losses from cyber-enabled crime amounted to nearly $21 billion, including $7.7 billion impacting seniors over 60. 

The Certified Financial Planner Board of Standards put the broader toll even higher, saying Americans lost $68 billion to financial scams last year – roughly $186 million a day – as it applauded the bipartisan group of sponsors behind the bill, including Miller, Rep. Tom Suozzi (D-N.Y.), Rep. Greg Steube (R-Fla.) and Rep. Jamie Raskin (D-Md.)

Trade groups representing financial advisors moved quickly to press the Senate to take up the bill. The Financial Services Institute, which represents independent broker-dealers and advisors, said the current tax treatment compounds the damage fraud already does to victims.

"Victims of financial fraud should not face an additional tax burden after already suffering significant financial losses," said FSI President and CEO Dale Brown, who added that the organization "urge[s] the Senate to take up this bill and act quickly to provide much-needed relief to fraud victims."

Read more: House passes bipartisan bill to shield seniors from investment fraud

CFP Board was similarly blunt about the stakes, noting that its certificants often serve as "financial first responders" for clients whose finances have been upended by fraud. Its support for H.R. 9500 is part of a broader anti-fraud campaign it has run for much of the past year.

Last September, it cited "combatting and protecting victims from fraud and financial exploitation" under its formal public policy priorities, falling within the broader umbrella of consumer protection. More recently in June, the credentialing body mark submitted a letter of support backing the bill directly to the House Ways and Means Committee, following that up with similar letter of support when the committee pushed it to a floor vote in July. 

H.R. 9500 now heads to the Senate, where a companion effort has drawn support in the past but has not always cleared the chamber before a session ends. With the Senate expected to break for the midterm elections in early October, the bill now faces an uncertain timeline to be formally ratified and promulgated into law.