Can you write off losses from a Ponzi scheme?

Under the IRS rules, an investor in a Ponzi scheme is entitled to deduct his or her losses as a theft loss, instead of a capital loss from an investment.

What type of loss is a Ponzi scheme?

The IRS determined that in the case of a Ponzi scheme, in which the lead figure deprived investors of money by criminal acts, the investors’ losses are theft losses, not capital losses.

How do I deduct theft losses on my taxes?

Individuals may claim their casualty and theft losses as an itemized deduction on Schedule A (Form 1040), Itemized Deductions (or Schedule A (Form 1040-NR)PDF, if you’re a nonresident alien).

What to do if you are a victim of a Ponzi scheme?

Report the fraud to law enforcement. Local Law Enforcement—Contact any local law enforcement office to file a police report. District Attorney—Contact your local District Attorney’s Office. Attorney General—Contact your state’s Attorney General’s Consumer Protection unit and the prosecution unit to report the fraud.

Are theft losses deductible in 2021?

For tax years 2018 through 2025, you can no longer claim casualty and theft losses on personal property as itemized deductions, unless your claim is caused by a federally declared disaster.

Can I deduct a theft loss in 2021?

How do I deduct business theft losses?

The simplest way to deduct them is by adding the value of the stolen property to the cost of goods sold you report on your business tax return — on Schedule C for sole proprietorships, Form 1065 for partnerships, Form 1120 for corporations or Form 1120S for S corporations.

How much loss can you write off?

$3,000
The IRS allows you to deduct up to $3,000 in capital losses from your ordinary income each year—or $1,500 if you’re married filing separately. If you claim the $3,000 deduction, you will have $10,500 in excess loss to carry over into the following years.

Can you deduct business theft losses on taxes?

Generally, in order to deduct a theft loss, a taxpayer must prove that a theft occurred under the law of the jurisdiction wherein the alleged loss occurred (Monteleone, 34 T.C. 688 (1960)).

Can business losses offset personal income?

Generally, business losses that are passed through to these owners can be used to offset other personal income. But if there is an excess business loss, it can’t be used currently. Instead, it’s treated as a net operating loss (NOL) carryover.

What is the maximum capital loss deduction for 2021?

Your maximum net capital loss in any tax year is $3,000. The IRS limits your net loss to $3,000 (for individuals and married filing jointly) or $1,500 (for married filing separately). Any unused capital losses are rolled over to future years. If you exceed the $3,000 threshold for a given year, don’t worry.