According to new data from the Federal Trade Commission, consumers lost over $12.5 billion to fraud in 2024. Investment scams topped the list, racking up a staggering $5.7 billion in reported losses. And older adults were disproportionately affected.

As a CPA, one of the questions I often hear is:

“Can I deduct my scam losses on my tax return?”

The answer? It depends.

Under the old rules, many fraud-related losses could qualify as deductible theft losses. But that changed with the Tax Cuts and Jobs Act (TCJA) in 2017.

📉 From 2017–2025, personal theft losses are only deductible if they’re linked to a federally declared disaster. That means most scam-related losses are no longer deductible.

But here’s the twist…

👉 If the scam was connected to a for-profit activity or involved business property, the loss may still be deductible.
This includes scams where the victim was trying to grow their investments or protect retirement accounts.

The IRS chief counsel recently clarified that certain scams do qualify for theft loss deductions:

✅ Deductible scams (profit-motivated):

• Investment fraud (“pig butchering”)
• Phishing scams targeting IRA/non-IRA accounts
• Fake brokerage schemes

❌ Non-deductible scams (emotionally motivated):

• Romance scams
• Fake kidnapping or relative-in-trouble scams

In short:
💰 If the scam played on your greed = Deductible
❤️ If the scam preyed on your heart = Not deductible

Ridiculous? Maybe. But that’s how the current tax code is written.

If you or someone you know has been the victim of a scam, it’s worth having a qualified tax professional review the situation. There may be options.