Congress wants to let scam victims deduct their losses again. This required a bill. Someone had to write legislation explaining that people who got their money stolen should not also owe taxes on the money they no longer have.
The 2017 tax reform killed the theft loss deduction. Lawmakers sat in a room and decided that if a guy in Nigeria takes your life savings, you still owe Uncle Sam his cut of money that is now funding someone else's retirement in Lagos. They called this simplifying the tax code.
Here's how it works now. You wire $50,000 to a fake investment account. The scammer vanishes. You report zero income because you made zero dollars. The IRS sees a $50,000 outflow and asks where you got fifty grand to lose. You explain you got scammed. They say congratulations, you owe taxes on the phantom income we just invented to balance your return. You ask if they're f*cking kidding. They are not f*cking kidding.
The new bill would restore the pre-2018 rule. It would also add relief provisions for fraud victims, which is Congress-speak for we figured out that taxing people on money they got robbed of makes us look like sociopaths.
This passed the House already. It needs Senate approval. Vegas odds on the Senate caring about scam victims are sitting right next to the odds on Bill Hwang starting a risk management consultancy.
Retail traders heard about this bill and got excited. They think it means they can deduct their options losses. It does not mean that. Getting scammed requires a criminal. Losing your rent money on zero-day calls just requires you and your Robinhood account. The IRS knows the difference even if you don't.
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