Repeals the limit on personal casualty loss deductions and lets taxpayers claim certain fraud-related theft losses in the year they occurred, with longer refund deadlines and a two-year Treasury processing deadline.

• Strikes paragraph (5) of Internal Revenue Code section 165(h), removing the limit on deductions for personal casualty losses.
• Allows taxpayers to elect to treat theft losses involving fraud, deceit, or misrepresentation as sustained in the year they occur, instead of the year they are discovered.
• Extends the refund claim period for those losses to at least 1 year after discovery and sets aside the limit in section 6511(b)(2).
• Adds an exception to the early-withdrawal tax for retirement distributions tied to such losses, which may be repaid within 1 year of discovery.
• Requires Treasury to process refund claims for specified personal casualty losses within 2 years of filing, including losses tied to pyrrhotite-damaged home foundations.
• Applies to losses in tax years beginning after December 31, 2025, with earlier dates for specified fraud-related and pyrrhotite-related losses sustained after December 31, 2020.

• Ways and Means Committee (House)
• Finance Committee (Senate)

Taxation