Sponsors (3)
The bill trades targeted tax relief and more time to claim refunds for victims of theft, fraud, and certain property damage against reduced federal revenues, greater IRS administrative burden and potential uncertainty from broad definitional authority, with a secondary risk to individual retirement savings for those who tap accounts to cover losses.
Homeowners and other taxpayers who suffer personal theft or casualty losses (including certain fraud-related losses) can deduct those losses and — for fraud-related thefts — elect to treat the loss in the year it occurred, giving affected taxpayers faster tax relief and potentially larger/earlier refunds.
Taxpayers (including homeowners with pyrrhotite damage) get an extended statute-of-limitations window to file refund claims related to fraud-related theft losses and specified pyrrhotite losses, giving them more time to recover past overpayments.
Seniors and other taxpayers who take retirement-plan distributions to cover covered fraud-related theft losses can treat those distributions as excepted distributions, avoiding early-withdrawal penalties and easing short-term cash needs.
Taxpayers as a whole may face reduced federal revenues because expanding deductible personal casualty and theft losses (and allowing retroactive claims) will lower tax receipts, potentially increasing deficits or crowding out other spending.
The IRS and affected taxpayers may face increased administrative burden, more complex audits, and a surge/backlog of refund claims (including retroactive pyrrhotite claims), which could delay processing and refunds for many taxpayers.
The Secretary's broad authority to define 'fraud, deceit, or misrepresentation' could create uncertainty and uneven application, making it harder for some taxpayers to determine eligibility for the election or refunds.
Based on analysis of 2 sections of legislative text.
Expands theft/casualty loss timing rules for fraud victims, extends refund claim deadlines for discovered fraud losses, and creates a retirement distribution penalty exception tied to those losses.
Allows taxpayers to claim theft losses tied to fraud as sustained earlier and extends the time to claim refunds for those losses. It restores wider casualty/theft loss treatment for fraud-related losses, creates an exception for certain retirement-distribution penalties tied to those losses, and lengthens limitations periods for refund or credit claims when taxpayers discover fraud-related losses. Most changes take effect for taxable years beginning after December 31, 2025, with special retroactive relief for homeowners with pyrrhotite-related casualty losses through December 31, 2025.
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 June 29, 2026 by Max Miller · Last progress September 16, 2026