US Income Tax deduction for theft

Somebody brought this up on another board and I thought i might be worth posting here as well. Victims in the US might be able take an income tax deduction for theft/fraud losses, if they qualify to itemize their deductions. In order to take the deduction, there needs to be documentation. This is another reason why the scam should be reported to the local police and it is important to keep copies of any money transfer receipts, and emails/chat logs that discuss the exchange of money.

Interesting,

I have not heard of it but it certainly would change the odd thing or 2 in regards to scams.
More people would report it and when the government begin to see how much it is costing them in lost revenue they may be more enclined to try and fix the problem

I guess if it is a "business venture", you have gone into it to make an income so therefore any losses are are in the course of earning the incoming, I dont know a thing abouut US tax laws but I do know the odd little bit about Australian tax, I believe that here you must actually make some income before being able to claim the deduction, in the case of scams you never get a cent.

I would be interested to find out more about this

I know quite a bit about UK income tax and there's no way it would be allowed here. i can't think of any scam which would be accepted as a genuine business.

In the US there is a legitimate deduction for casualty or theft losses. (I used to prepare income taxes for people). For individuals, it is a line on the standard US 1040, Itemized Deductions, Schedule A, Casualty or theft loss(es) and Form 4684. There are rules that apply regarding the amounts that can be deducted...Casualty and theft losses are first limited by an $100 threshold per loss event. First the amount needs to be over $100. The first $100 of the loss is subtracted, Than there is an overall threshold of 10% of your adjusted gross income. So basically the amount that is deductible is the amount that is over 10% of your salary, and that is only if you are eligible to itemize deductions in the first place. So it is not a huge deduction, but it is something. There are also rules for losses in a business venture or casualty or theft of business property.

Of course people should check with their individual tax adviser. For general information you can do a Google search on casualty and theft loss deduction.

I do agree with your comment quoted here:

More people would report it and when the government begin to see how much it is costing them in lost revenue they may be more enclined to try and fix the problem.

Also in general, I think all victims should report the scams to their local police. I know many are embarrassed or don't want to be bothered to report it because they know that law enforcement won't really do anything about it. Maybe this will be an added incentive to get more people to report it.

Well this is definitely something I'll send in follow up to my US victims. (Tell them to talk to their advisor/accountant, not that they can right off all their taxes)

Thank newdon, That is why I posted...

@Harvest,

I appreciate that you have been able to provide this advice, I dont mean to give you homework but could you possibly put something togther here including some links in a seperate thread that we may be able to use as a sticky on the subject and direct our US scam victims to.

Ralph, I can certainly do that. I am willing to help in anyway I can. I also have over 25 years of research experience that I put to use in the fight against fraud.