The Tax Relief for Fraud Victims Act amends tax law to help people who have lost money to fraud and theft. The bill eliminates the current limitation that restricts how much people can deduct for personal casualty losses on their taxes, allowing broader deductions for losses due to disasters and accidents. For theft losses involving fraud, deceit, or misrepresentation, the bill gives victims two major advantages: they can choose which tax year to claim the loss deduction in (normally the year they discover it, but they could pick when it occurred instead), and they get an extended one-year window after discovering the theft to file refund claims with the IRS rather than being bound by the normal time limits. The bill also allows people to withdraw money from retirement accounts without penalties if needed to cover fraud-related losses, with the ability to repay those withdrawals over a year. The changes take effect for losses in tax years beginning after December 31, 2025, though an exception allows people to claim pyrrhotite-related home foundation damage losses dating back to 2020.
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