Sponsors (2)
Official title: To amend the Internal Revenue Code of 1986 to repeal the limitation on deductions for personal casualty losses and to provide for increased taxpayer relief with respect to theft losses involving fraud, deceit, or misrepresentation.
Introduced January 9, 2026 by Max Miller · Last progress January 9, 2026
The bill increases and accelerates tax relief for victims of fraud (including allowing uncapped casualty deductions, earlier-year treatment, extended claim windows, and retirement-penalty relief) at the cost of reduced federal revenue, greater administrative and enforcement burdens, and added complexity for taxpayers and institutions.
Taxpayers (including middle‑class families) who suffer theft or fraud can claim casualty/theft losses without the current statutory limit and may elect to treat those losses as sustained in the year they occur, enabling larger and/or earlier tax relief and refunds.
Victims of fraud have a longer window to file refund or credit claims (at least one year after discovery), improving the practical ability of affected taxpayers to recover overpaid tax.
Individuals with retirement accounts who suffer fraud-related losses can use repayment options or qualify for exceptions to the 10% early-distribution penalty, reducing tax penalties and financial harm for seniors and other account holders forced to withdraw funds.
Removing the casualty-loss cap and expanding refund/election opportunities will likely reduce federal tax receipts, increasing the budgetary cost of the law and potentially widening the deficit or requiring offsets.
Broader deductions, elections, and penalty exceptions create additional avenues for abusive or fraudulent refund claims, which could raise IRS compliance and enforcement costs and strain administration.
The new elections, definitions delegated to the Secretary, and special repayment rules add complexity that may increase taxpayer confusion and compliance burden—especially for seniors handling retirement distributions.
Based on analysis of 2 sections of legislative text.
Allows taxpayers who suffer thefts due to fraud, deceit, or misrepresentation to claim those losses in the year the loss occurred (rather than the year of discovery), repeals the existing personal casualty loss limit, and extends special refund/credit and repayment windows for claims tied to fraud-related theft losses. It also creates comparable repayment and limitation-period rules for retirement-plan distributions taken because of such losses, with the changes generally effective for tax years and distributions after December 31, 2025.
Allows election to treat fraud-related theft losses as sustained in the loss year, repeals a personal casualty loss limit, and extends special refund and retirement-distribution repayment windows.