Sponsors (2)
The bill expands tax relief and recovery options for victims of fraud, theft, and casualty losses but at the cost of reduced federal receipts and increased administrative and legal complexity.
Taxpayers (including middle-class families) who suffer theft, fraud, or personal casualty losses can claim deductible losses and may restore retirement-account funds through special rollover/repayment relief, increasing direct tax relief and helping recover retirement savings.
Taxpayers who are victims of theft involving fraud get an extended, discovery-based window (at least one year after discovery) to file refund or credit claims, reducing the risk that victims lose refund rights because they discovered the loss late.
All taxpayers may face larger federal deficits or the need for offsets because removing the casualty-loss limitation and expanding refund/rollover relief is likely to reduce federal tax receipts.
Taxpayers and financial institutions may encounter increased administrative burden and more complex IRS processing because discovery-based limitation rules and extended refund windows complicate audits, claims, and compliance.
Taxpayers and affected businesses (e.g., government contractors) could face uncertainty and litigation risk because the new election treating fraud-related theft losses as sustained when they occur may prompt disputes over timing and the Secretary's definitions.
Based on analysis of 2 sections of legislative text.
Introduced January 9, 2026 by Max Miller · Last progress January 9, 2026
Allows taxpayers who suffer thefts or fraud to claim losses based on when they discover the loss, removes a current limit on personal casualty losses, and gives special repayment/rollover relief for retirement plan distributions used to cover fraud-related thefts. It also extends the time victims have to file refund or credit claims for tax deductions or tax on distributions tied to fraud-related thefts so the normal statute of limitations is measured from the date the taxpayer discovers the theft. The changes amend federal income tax rules to (1) treat theft losses as sustained in the year discovered (with an election to treat fraud-based thefts as sustained in the year of occurrence), (2) eliminate the current limitation on personal casualty losses, (3) extend limitation periods for refund claims tied to fraud-related theft losses, and (4) permit rollover/repayment relief for retirement distributions used to cover such losses with extended repayment windows and matching extended refund claim deadlines. Most changes apply to taxable years beginning after Dec 31, 2025; retirement distribution relief applies to distributions after Dec 31, 2025.