House passes the Tax Relief for Fraud Victims Act (H.R. 9500)

H.R. 9500, the Tax Relief for Fraud Victims Act, passed the House of Representatives on September 15, 2026 by a vote of 408 to 17, on a motion to suspend the rules and pass the bill as amended. The next day it was received in the Senate, read twice, and referred to the Committee on Finance. The bill would repeal the limit that currently blocks most personal theft-loss deductions, and would let victims of theft involving fraud deduct the loss in the year it happened.

The vote is recorded as Roll no. 305 in the Clerk of the House’s roll call: 408 members voted yes, 17 voted no, and 8 did not vote. Ways and Means had ordered the bill reported 39 to 0 on July 1, 2026.

What the bill would change

The operative text is the version as passed by the House, on govinfo.gov. Section 2(a) strikes paragraph (5) of section 165(h) of the Internal Revenue Code — the paragraph that allows a personal casualty or theft loss deduction only when the loss arises from a federally declared or State-declared disaster, or to the extent it offsets personal casualty gains.

The bill also rewrites the timing rule. Under current law a theft loss is treated as sustained in the year the taxpayer discovers it. The bill keeps that as the default and adds an election:

“In the case of any loss arising from theft involving fraud, deceit, or misrepresentation (as defined by the Secretary), the taxpayer may elect to treat such loss as sustained during the taxable year in which such loss occurs.”

— H.R. 9500 as passed by the House, sec. 2(b)(1), adding section 165(e)(2)

Three other changes in the passed text:

• A reopened refund window. For these losses, the period for filing a refund claim is treated as not expiring earlier than one year after the date the taxpayer discovers the loss, and the usual cap on how much of that refund can be paid would not apply.
• Retirement withdrawals. A new subparagraph in section 72(t)(2) would except distributions relating to these theft losses from the 10 percent additional tax on early distributions, and would give the taxpayer one year from discovery to repay the distribution.
• A processing deadline on the IRS. For a qualifying claim, the Secretary of the Treasury “shall process such claim not later than 2 years after the date on which such claim is filed.”

The relief reaches backwards. The passed text defines a fraud-related personal casualty loss as one sustained after December 31, 2020 and before January 1, 2026 arising from theft involving fraud, deceit, or misrepresentation, and applies the new rules to those years as well as to losses in 2026 and later.

One point worth stating plainly: the text of H.R. 9500 does not mention digital assets, cryptocurrency, or any other specific asset class. It turns on how a loss happened, not on what was stolen.

What this means for you

Nothing about your filings changed on September 15. House passage is one step of several; H.R. 9500 is now before the Senate Finance Committee, and until a bill is enacted the existing rules apply to your return.

Under those rules, a scam loss may still be deductible if you entered the transaction with a profit motive — a fake investment platform, for example — even though purely personal theft losses generally are not. Our crypto scam losses guide walks through that analysis, and how a retirement withdrawal taken because of a scam is treated. Both are unchanged today.

Useful either way: keep the records any theft-loss claim depends on — what you put in and when, wallet addresses and transaction hashes, your reports to law enforcement, and anything showing there is no reasonable prospect of recovery. If you are also sorting out unreported activity from those years, see unreported crypto.

Last updated September 17, 2026

This page is educational and does not constitute tax or legal advice for your specific situation. For questions about your own filings, consult a qualified tax professional.