(Last Updated On: April 22, 2022)

Deducting Financial Losses Of ScamsScams A Scam is a confidence trick - a crime -  is an attempt to defraud a person or group after first gaining their trust through deception. Scams or confidence tricks exploit victims using their credulity, naïveté, compassion, vanity, irresponsibility, or greed and exploiting that. Researchers have defined confidence tricks as "a distinctive species of fraudulent conduct ... intending to further voluntary exchanges that are not mutually beneficial", as they "benefit con operators ('con men' - criminals) at the expense of their victims (the 'marks')". A scam is a crime even if no money was lost. From Your U.S. Income Tax

A SCARSSCARS SCARS - Society of Citizens Against Relationship Scams Inc. A government registered crime victims' assistance & crime prevention nonprofit organization based in Miami, Florida, U.S.A. SCARS supports the victims of scams worldwide and through its partners in more than 60 countries around the world. Incorporated in 2015, its team has 30 years of continuous experience educating and supporting scam victims. Visit www.AgainstScams.org to learn more about SCARS. Guide

A Legacy Post from our Archives

PLEASE NOTE: THIS WAS ORIGINALLY POSTED PRIOR TO 2018

THIS INFORMATION IS NOT LONGER VALID FOR TAX YEARS 2018 THROUGH 2025 – THOUGH IT MIGHT BECOME VALID AGAIN DEPENDING ON THE U.S. CONGRESS.

FOR NOW PLEASE DISREGARD THIS INFORMATION EXCEPT IF YOU WERE THE VICTIM OF A SCAMScam A Scam is a confidence trick - a crime -  is an attempt to defraud a person or group after first gaining their trust through deception. Scams or confidence tricks exploit victims using their credulity, naïveté, compassion, vanity, irresponsibility, or greed and exploiting that. Researchers have defined confidence tricks as "a distinctive species of fraudulent conduct ... intending to further voluntary exchanges that are not mutually beneficial", as they "benefit con operators ('con men' - criminals) at the expense of their victims (the 'marks')". A scam is a crime even if no money was lost. PRIOR TO 2018

2018 UPDATE – PLEASE NOTE – Per the IRSIRS The Internal Revenue Service (IRS) is the revenue & tax service of the United States federal government responsible for collecting taxes and administering the Internal Revenue Code (the main body of federal statutory tax law.) It is part of the Department of the Treasury and led by the Commissioner of Internal Revenue, who is appointed to a five-year term by the President of the United States. The duties of the IRS include providing tax assistance to taxpayers; pursuing and resolving instances of erroneous or fraudulent tax filings; and overseeing various benefits programs. Visit www.IRS.gov to learn more.: For tax years 2018 through 2025, the Act has suspended the itemized deduction for personal casualty and theft losses. Prior to this change in the law, personal casualty or theft losses were only deductible to the extent they exceeded $100 per casualty or theft event. However, if your loss occurred in 2017 or before you may be able to go back and Amend your tax returns – speak to a professional tax preparer for details.

IF YOU WERE A VICTIM PRIOR TO 2018 YOU MAY HAVE AN OPTION TO REFILE AND INCLUDE YOUR LOSSES. SEE A TAX PROFESSIONAL TO KNOW FOR SURE.

Deducting Financial Losses Of Scams From Your U.S. Income Tax

NOTE THIS ONLY APPLIES TO LOSSES BEFORE 2018

The following is not intended as Tax Advice and is provided for educational purposes only. Consult a professional tax preparer or tax attorney for all legal or professional advice about your taxes.

Is It Possible To Recover Some Of Your Money Through Your Taxes? Maybe!

You can legally claim casualty and theft losses on personal property as itemized deductions on a United States Tax Return.

According to H&R Block you would do this on Form 4684 – Theft and Casualty Losses »

How To Do It?

You can claim casualty and theft losses on personal property as itemized deductions. Use Form 4684 to figure your losses and report them on Form 1040Schedule A.

You can only deduct losses not reimbursed or reimbursable by insurance or other means. You’ll need to subtract $100 from each casualty loss of personal property. The total of your casualty and theft losses on personal property must be more than 10% of your adjusted gross income (AGI). Otherwise, you can’t claim a deduction for that portion of the loss above the limit.

What’s a casualty?

A casualty is damage, destruction, or property loss resulting from one of these identifiable events:

  • Sudden event — swift, rather than gradual or progressive
  • Unexpected event — ordinarily unanticipated and unintended
  • Unusual event — not a day-to-day occurrence

Deductible losses

Deductible casualty losses can result from events like:

  • Car accidents (See Nondeductible losses below for exceptions.)
  • Earthquakes
  • Fires (See Nondeductible losses below for exceptions.)
  • Floods
  • Government-ordered demolition or relocation of a home that’s unsafe to use because of a disaster. A disaster is an event that occurred in an area the president declares eligible for federal assistance.
  • Mine cave-ins
  • Shipwrecks
  • Sonic booms
  • Storms, like hurricanes and tornadoes
  • Terrorist attacks
  • Vandalism
  • Volcanic eruptions
  • Loss on deposits when a bank or other financial institution becomes insolvent or bankrupt. If you incurred this type of loss, you can deduct it as one of these:
    • Casualty loss
    • Ordinary loss
    • Nonbusiness bad debt

However, after you make the choice, you can’t change it without permission from the IRS. To learn more, see Publication 547: Casualties, Disasters and Thefts at www.irs.gov.

Nondeductible losses

You can’t deduct a casualty loss if the damage or destruction is caused by any of these:

  • Accidentally breaking items, like glassware or china, under normal conditions
  • Damage a family pet does, unless the casualty requirements are met. Ex: Your new puppy, who’s not housebroken, damaged your antique Oriental rug. Since the damage isn’t unexpected or unusual, you can’t deduct the loss.
  • Fire you willfully set or you paid someone else to set
  • Car accident if your willful negligence or willful act caused it. The same is true if someone acting for you caused the accident.
  • Progressive deterioration if the damage results from a steadily operating cause or a normal process, like:
    • Steady weakening of a building due to normal wind and weather conditions
    • Deterioration and damage to a water heater that bursts. However, the damage to rugs and drapes caused by the bursting of a water heater qualifies as a casualty.
  • Most losses of property caused by droughts. To deduct it, you must have incurred a drought-related loss in one of these:
    • Trade or business, like farming
    • Transaction entered into for profit
  • Termite or moth damage
  • Damage or destruction of trees, shrubs, or other plants by:
    • Fungus
    • Disease
    • Insects, worms, or similar pests. However, a sudden destruction due to an unexpected or unusual insect infestation might result in a casualty loss.

Failure to file an insurance claim for reimbursement

If your property is covered by insurance, you must file a timely insurance claim for your loss. Otherwise, you can’t deduct the loss as a casualty or theft. However, the portion of the loss not covered by insurance, like a deductible, isn’t subject to this rule. To learn more, see Publication 547: Casualties, Disasters, and Thefts at www.irs.gov.

What’s a theft?

A theft is the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be:

  • Illegal under the law of the state where it occurred
  • Done with criminalCriminal A criminal is any person who through a decision or act engages in a crime. This can be complicated, as many people break laws unknowingly, however, in our context, it is a person who makes a decision to engage in unlawful acts or to place themselves with others who do this. A criminal always has the ability to decide not to break the law, or if they initially engage in crime to stop doing it, but instead continues. intent

Theft includes the taking of money or property by:

  • Blackmail
  • Burglary
  • Embezzlement
  • Extortion
  • Kidnapping for ransomRansom A ransom is an amount of money or other assets of value that is paid for blackmail, extortion, or under other threats or coercion. The ransom is usually paid in cash or now in cryptocurrency. Online blackmail, sextortion, and ransomware all demand ransoms to avoid negative outcomes.
  • Larceny
  • Robbery
  • FraudFraud In law, fraud is intentional deception to secure unfair or unlawful gain (money or other assets), or to deprive a victim of a legal right. Fraud can violate civil law (e.g., a fraud victim may sue the fraud perpetrator to avoid the fraud or recover monetary compensation) or criminal law (e.g., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities), or it may cause no loss of money, property, or legal right but still be an element of another civil or criminal wrong. The purpose of fraud may be monetary gain or other benefits, for example by obtaining a passport, travel document, or driver's license, or mortgage fraud, where the perpetrator may attempt to qualify for a mortgage by way of false statements. A fraud can also be a hoax, which is a distinct concept that involves deliberate deception without the intention of gain or of materially damaging or depriving a victim. or misrepresentation

Figuring and proving a loss

To figure your deduction for a casualty or theft loss, first figure the amount of your loss. Then:

  1. Figure your adjusted basis in the property before the casualty or theft.
  2. Figure the decrease in fair market value (FMV) of the property resulting from the casualty or theft.
  3. From the smaller of the amounts in steps 1 and 2, subtract insurance or other reimbursement you received or expect to receive.

You should prove a casualty caused your loss. So, keep newspaper accounts and other proof showing the type of casualty that struck your area and the amount of damage it did.

To prove the amount of your loss, you should have:

  • Purchase receipts for the affected property
  • Receipts for improvements made to the affected property
  • Pre- and post-casualty appraisals for the affected property

To learn more, see Publication 547: Casualties, Disasters, and Thefts at www.irs.gov.

Deducting a loss in a presidentially declared disaster area

If your loss is part of a presidentially declared disaster, you can deduct the loss on your prior-year return. If you’ve already filed your prior-year return, you can file an amended return to claim the deduction.

Claiming a qualifying disaster loss on your prior-year return:

  • Could result in a lower tax for that year
  • Often produces or increases a cash refund
  • Might let you get your money months earlier than if you wait to claim your loss on your current-year return

Casualty or theft gain

It’s possible to have taxable gain after a casualty or theft. You have a gain if you receive an insurance payment or other reimbursement that’s more than your adjusted basis in property that’s:

  • Destroyed
  • Damaged
  • Stolen

To find your gain, subtract the adjusted basis of the property at the time of the incident from the amount you receive. It doesn’t matter if the decrease in the fair market value (FMV) of your property is less than the adjusted basis of your property. No matter what, you must use the adjusted basis to figure the gain.

Amount you receive

The amount you receive includes the total of:

  • Insurance payment
  • Value of property you received minus expenses you incurred while pursuing reimbursement
  • Reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property

Reporting a gain

Usually, you must report your gain as income in the year you receive the reimbursement. However, you don’t have to report your gain if you:

  • Meet certain requirements
  • Postpone reporting the gain by buying replacement property

To learn more, see the Postponement of

Gain chapter in Publication 547: Casualties, Disasters, and Thefts at www.irs.gov.

Casualty or theft of business or income-producing property

You might suffer a casualty or theft loss to property used in a business, like a vehicle or rental property. If so:

  • You don’t have to reduce the loss amount by the $100 reduction.
  • The 10% of AGI rules don’t apply.

To figure the loss amount, subtract these items from the property’s adjusted basis:

  • Salvage value
  • Insurance proceeds or other reimbursement

You’ll take the loss on Form 4684, Part II.

Please Note: You will have to explore this with a tax professional to determine if you qualify for a deduction or other tax benefit (such as a credit). Also, if you received money or property from a scammerScammer A Scammer or Fraudster is someone that engages in deception to obtain money or achieve another objective. They are criminals that attempt to deceive a victim into sending more or performing some other activity that benefits the scammer., be sure you reported it to the police and turned it over to them to avoid possible tax implications.

The foregoing is not intended as Tax Advice and is provided for educational purposes only. Consult a professional tax preparer or tax attorney for all legal or professional advice about your taxes. Please discuss this with H&R Block or other tax professionals – be sure you do not believe urban legends that you may read online – always seek competent advice.

Essential Tools For Every Scam Victim From SCARS Publishing

Visit shop.AgainstScams.org

Each is based on our SCARS Team’s 31 plus years of experience.

SCARS Website Visitors get an Extra 10% Discount
Use Discount Code “romanacescamsnow” at Checkout

SCARS GREN BOOK - The SCARS STEPS Guide to Scam Victim Recovery

SCARS GREEN BOOK
Self-Help Self-Paced Recovery Program Guide

LEARN HOW TO RECOVER ON YOUR OWN

This program is designed to help scam victims struggling to recover on their own and for those who want to understand the overall process. You can be using other resources, such as traumaTrauma Emotional and psychological trauma is the result of extraordinarily stressful events that shatter your sense of security, making you feel helpless in a dangerous world. Psychological trauma can leave you struggling with upsetting emotions, memories, and anxiety that won’t go away. It can also leave you feeling numb, disconnected, and unable to trust other people. Traumatic experiences often involve a threat to life or safety or other emotional shocks, but any situation that leaves you feeling overwhelmed and isolated can result in trauma, even if it doesn’t involve physical harm. It’s not the objective circumstances that determine whether an event is traumatic, but your subjective emotional experience of the event. The more frightened and helpless you feel, the more likely you are to be traumatized. Trauma requires treatment, either through counseling or therapy or through trauma-oriented support programs, such as those offered by SCARS. counselingCounseling Counseling is the professional guidance of the individual by utilizing psychological methods especially in collecting case history data, using various techniques of the personal interview, and testing interests and aptitudes. A mental health counselor (MHC), or counselor, is a person who works with individuals and groups to promote optimum mental and emotional health. Such persons may help individuals deal with issues associated with addiction and substance abuse; family, parenting, and marital problems; stress management; self-esteem; and aging. They may also work with "Social Workers", "Psychiatrists", and "Psychologists". SCARS does not provide mental health counseling. or therapy, qualified support groupsSupport Groups In a support group, members provide each other with various types of help, usually nonprofessional and nonmaterial, for a particular shared, usually burdensome, characteristic, such as romance scams. Members with the same issues can come together for sharing coping strategies, to feel more empowered and for a sense of community. The help may take the form of providing and evaluating relevant information, relating personal experiences, listening to and accepting others' experiences, providing sympathetic understanding and establishing social networks. A support group may also work to inform the public or engage in advocacy. They can be supervised or not. SCARS support groups are moderated by the SCARS Team and or volunteers., or completely independent – on your own!

The SCARS Steps program is a complete program and is provided for the purpose of helping scam victims to overcome this experience. Throughout this SCARS Steps Program, we speak about issues and challenges that a victim may have and help guide them through their recovery. But each person is different and it is important to understand your own reasons for being vulnerable to being scammed.

After the trauma of being scammed, you need to take steps to recover and move on. This may be an alternative to counseling in the short term, but we still encourage you to seek out professional help & support. Throughout this SCARS Steps Program, we speak about issues, challenges, defects, or problems that a victim may have in a generalized way.

The SCARS GREEN BOOK will help you recover from your scam offline and it will always be there when you need it!

Get it here

SCARS RED BOOK - Your Personal Scam Evidence & Crime Record Organizer

SCARS RED BOOK
Your Personal Scam Evidence & Crime Record Organizer

ORGANIZE YOUR INFORMATION TO MAKE THE REPORTING PROCESS SIMPLE!

Helps you get and stay organized. This publication is to help Scam Victims organize their crime information. Complete this information before reporting to the police then bring this book with you

Before or after reporting to the police the RED BOOK gives you a dedicated tool to record all the essential facts of this crime. The Victim, the Scammers, the Money, and your Police interactions. Everything that really matters can be easily recorded for your immediate use and for the future!

As we have seen, money recovery/repayment programs can become available years after the scam ends and you need to keep all the details of this crime in case it is needed. We have also seen scammers being extradited to the U.S. and other countries, this will help in the event you testify or give statements, Additionally, this helps you have your information ready to qualify for victims’ benefits, compensation, or aid.

The Official SCARS RED BOOK is your way of recording all the important facts of this crime so that you do not lose essential information, Complete the RED BOOK then put it away with the confidence that you will have it if or when it is needed.

Get it here

SCARS SLATE BOOK - A Guide For Families & Friends Of Scam Victims

SCARS SLATE BOOK
A Guide For Families & Friends Of Scam Victims

HOW TO HELP ROMANCE SCAM VICTIMS FOR FAMILIES & FRIENDS OF SCAM VICTIMS

This SCARS Publishing book represents a complete guide to help the families and friends understand how these scams work and how to help the victim.

The SCARS Slate Book should be purchased by family and friends to better understand what happened to the victim and the traumatic impact on them. But it can also be shared by the victim so that they do not have to explain to family and friends about the scam. This publication is to help others to help Scam Victims to make it through this traumatic experience and recover.

Each person is different and it is important to understand how relationship scamsRelationship Scam A Relationship Scam is a one-to-one criminal act that involves a trust relationship and uses deception & manipulation to get a victim to give to the criminal something of value, such as money! Click here to learn more: What Is A Relationship Scam? work and why people are vulnerable; to being scammed, how they were lured in, then groomed and manipulated. This understanding is essential in helping them through the process of ending the scam and then on to recovery. The SCARS Slate Book will provide the information necessary to help support a victim through this process.

Get it here

SCARS BLUE BOOK - Survivor's Recovery Journal
SCARS LIME BOOK - Wisdom & Motivation for Scam Victims
SCARS CHERRY BOOK - A Guide To Understanding Your Fear
SCARS WORKBOOK - 8 Steps To Improvement
SCARS WORKBOOK - Understanding Self-Blame, Guilt, and Shame
100% of all profit goes to support FREE Scam Victims' Services

See all our books and motivational gifts for scam victims at Shop.AgainstScams.org

100% of all profit goes to help SCARS help more scam victims worldwide.

Your generous purchase allows us to maintain our scam avoidance, support, and recovery services. Please help SCARS and stand proud.

Always Report All Scams – Anywhere In The World To:

U.S. FTCFTC The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) U.S. antitrust law and the promotion of consumer protection. The FTC can also act as a clearinghouse for criminal reports sent to other agencies for investigation and prosecution. To learn more visit www.FTC.gov or to report fraud visit ReportFraud.FTC.gov at https://reportfraud.ftc.gov/#/?orgcode=SCARS and SCARS at www.Anyscams.com