Trying to preserve assets can qualify as a profit motive for theft loss deduction

The Tax Cuts and Jobs Act eliminated a deduction for many consumer fraud losses through 2025. Now, taxpayers can only deduct casualty and theft losses associated with federally declared disasters or “transactions entered into for profit.” So some fraud victims may get hit twice, first by theft and second by taxes on stolen retirement funds and other assets. But in recent guidance (CCA 202511015), the IRS listed several fraud schemes that might allow victims to seek tax relief, including investment, impersonation and “pig butchering” scams. The IRS says that trying to preserve assets qualifies as a profit motive, making theft losses potentially eligible for deduction.