H.R. 9500 (Tax Relief for Fraud Victims Act): Restoring Theft Loss Deductions and Creating New Elections and Refund Rules

# What H.R. 9500 would change

On September 15, 2026, the House passed H.R. 9500, the Tax Relief for Fraud Victims Act. The bill would amend Title 26 of the U.S. Code to reverse a major post‑2017 limitation on individual casualty and theft loss deductions and add targeted rules for thefts that involve fraud, deceit, or misrepresentation.

# Major statutory amendments

• Repeal of the TCJA disaster‑only rule: H.R. 9500 would strike I.R.C. § 165(h)(5), the provision enacted after 2017 that limited deductible personal casualty and theft losses to those attributable to federally or state‑declared disasters. Removing paragraph (5) restores the earlier rule that allowed non‑disaster personal casualty and theft losses, subject to the standing statutory floors.

• Election for fraud‑related thefts: The bill rewrites I.R.C. § 165(e) to create a two‑track rule. Ordinary theft losses remain treated as sustained in the year of discovery. Theft losses involving fraud, deceit, or misrepresentation (terms to be defined by Treasury/IRS) would allow a taxpayer election to treat the loss as sustained in the year the loss occurred.

• Extension of refund period and waiver of lookback cap: H.R. 9500 would add an amendment to I.R.C. § 165(h)(4) that treats the limitations period for refund or credit claims based on fraud theft losses as not expiring earlier than one year after discovery. It would also prevent application of I.R.C. § 6511(b)(2)'s lookback cap that normally limits refunds to taxes paid within the immediate three‑year window.

# Practical impacts for tax practitioners and taxpayers

Restored deductibility. If enacted, individual taxpayers could again claim deductible personal casualty and theft losses that are not tied to declared disasters. Those deductions will still be subject to the pre‑TCJA statutory hurdles: the $100 floor per casualty or theft and the 10% of AGI aggregate floor.

Election planning opportunity. The new election for fraud‑related thefts creates concrete timing choices. For victims of fraud, practitioners should model outcomes for claiming the loss in the occurrence year versus the discovery year. The election could be especially valuable when the taxpayer's marginal rate, AGI thresholds, or NOL position differs materially between the two years.

Documentation and definitions. The bill references fraud, deceit, and misrepresentation as definable terms for Treasury/IRS guidance. Practitioners should anticipate rules or guidance that specify evidentiary thresholds and procedures for making the new election and supporting refund claims.

# Immediate caveat

The House passed H.R. 9500, but it is not law. It must still clear the Senate and be signed by the President. Until that happens, current law and the TCJA restrictions remain in force.

# Short checklist for advisers

• Track the bill's Senate progress and any amendments.
• Model tax outcomes under both occurrence and discovery year treatments for clients who suffered fraud losses.
• Preserve contemporaneous documentation of loss occurrence and discovery date, and collect evidence establishing fraud, deceit, or misrepresentation.
• Prepare for potential IRS guidance defining the terms and election mechanics.