Romance scams are among the most financially devastating types of fraud, with victims losing an average of tens of thousands of dollars. The emotional pain is compounded by the financial loss, and many victims wonder whether they can at least recover some of that money through a tax deduction. The answer is complicated, especially after the Tax Cuts and Jobs Act of 2017 changed the rules for personal theft losses.
This article explains the current tax landscape for romance scam victims, the exceptions that might apply, and why talking to a CPA is essential.
The Bad News: TCJA Suspended Most Personal Theft Deductions
Romance scam losses are generally classified as personal theft losses under Section 165 of the Internal Revenue Code. Before 2018, victims could deduct these losses as itemized deductions on Schedule A, subject to certain thresholds. The Tax Cuts and Jobs Act suspended personal casualty and theft loss deductions for tax years 2018 through 2025, with limited exceptions.
This means that if you sent money to a romance scammer for personal reasons — to help with an emergency, pay for a plane ticket, cover medical bills, or any other reason that was not an investment — the straightforward path to a federal tax deduction is currently blocked for most filers.
This is genuinely frustrating, especially for victims who lost substantial sums. But the story does not end here.
The Investment Angle: When Romance Scams Cross the Line
Many romance scams evolve beyond simple requests for money. A growing number of romance scammers introduce their victims to fake investment opportunities. This is sometimes called a "pig butchering" scam because the scammer "fattens up" the victim with romantic attention before steering them toward a fraudulent investment platform.
If your romance scammer convinced you to invest in cryptocurrency, stocks, forex trading, or any other supposed investment opportunity, the nature of your loss may change from a personal theft to an investment fraud loss. Investment fraud losses were not suspended by the TCJA and may still be deductible.
This is a nuanced area of tax law. The same scam can involve both personal transfers and investment fraud, and separating the two requires careful analysis. A CPA who specializes in fraud losses can help you determine which portions of your loss might qualify as investment fraud and which are personal in nature.
State Tax Deductions: An Often-Overlooked Option
Even if your romance scam loss does not qualify for a federal deduction, you may be able to deduct it on your state income tax return. Not all states conformed to the TCJA changes. Several states still allow theft loss deductions under their own tax codes, regardless of the federal rules.
The specific rules vary by state. Some states fully allow theft loss deductions, others partially allow them, and some follow the federal rules exactly. If you live in a state with its own income tax, it is worth having a CPA review whether a state deduction is available to you.
This is another reason to work with a tax professional who understands both federal and state rules around fraud losses. The team at ScamTaxHelp.com can evaluate your situation across both levels and identify all available deductions.
The TCJA Sunset: What Happens After 2025
The TCJA provisions that suspended personal theft loss deductions are scheduled to expire after tax year 2025. If Congress does not act to extend them, the pre-2018 rules would return, and personal theft losses — including romance scam losses — would once again be deductible on federal returns.
However, there is significant uncertainty about what Congress will do. They may extend the TCJA provisions, modify them, or let them expire. If you suffered a romance scam loss in recent years, it is worth keeping your documentation organized and watching for legislative changes that might open up new deduction opportunities.
A CPA can help you understand the timing implications and, if the rules do change, file amended returns for prior years if appropriate.
Documentation Is Critical Even If You Cannot Deduct Today
Even if your romance scam loss does not qualify for a deduction under current law, you should still document everything thoroughly. Tax laws change, and having organized records means you will be ready to claim a deduction if the rules shift in your favor. You may also need documentation for insurance claims, civil lawsuits, or law enforcement proceedings.
Keep police reports, bank statements showing all transfers to the scammer, screenshots of all communications, FTC and IC3 reports, and a written timeline of the relationship and the scam. For a complete guide, see our article on how to document a scam loss for your tax return.
You Are Not Alone
Romance scams carry a unique stigma. Victims often feel embarrassed and reluctant to seek help. But romance scams are one of the most common types of fraud reported to the FTC, affecting people of all ages, education levels, and backgrounds. The scammers are sophisticated professionals who manipulate emotions expertly. Being scammed is not a reflection of your intelligence.
Taking steps to explore tax recovery is a practical, empowering action. Even if the path is not straightforward, it is worth pursuing every avenue available to you.
Lost Money to a Romance Scam?
A CPA who specializes in fraud losses can evaluate whether any portion of your loss is deductible under current tax law. The consultation is free.
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