[1]Theft losses are NOT deductible under the current law, which was enacted as part of President Trump’s 2017 Tax Cuts and Jobs Act. If a person is scammed out of their retirement savings, they have to pay taxes on the income (since taxes were never paid on the original deducted contributions and the subsequent growth) AND they do not get a deduction for the theft loss.
A recent report spearheaded by U.S. Senate Special Committee on Aging brought light to this particularly egregious form of crime, typically perpetrated against the elderly. The report’s authors argue that the changes should be reversed, as in 2023 Americans lost about $10 billion to 2.6 million fraud incidents; older adults (age 60 and over) reported higher median losses [2] than other age groups.
If you fall prey to a scam involving retirement savings withdrawals, you may need to consult a tax attorney or other qualified tax professional like the CPAs at ShindelRock. Contact us for more information [3] and help managing your potential tax liability.