The Tax Rules for Scam Victims

A recent 2025 IRS legal memo clarifies exactly when internet scam victims can legally deduct theft losses on their taxes. To qualify, your financial loss must stem directly from a business or investment focused transaction. This important exemption covers common Ponzi schemes, fraudulent pitches promising large return alternative investments, and scams where victims are tricked into transferring money to protect their accounts. However, individuals defrauded through personal schemes like romance or virtual kidnapping scams cannot claim these deductions, even if they drained valuable retirement accounts to pay perpetrators.

Always stay vigilant, keep thorough financial records, report incidents quickly, and consult us before the statute of limitations to take your lose if gone forever.