In 2024, Florida ranked among the top states for phishing and investment scams. If you lost money in a “pig butchering” crypto scheme or had funds drained from your IRA, you may qualify for a tax deduction—even under the TCJA suspension of theft losses. For Sunrise, FL taxpayers, knowing the difference between deductible “for‐profit” scams versus non‐deductible “romance” or “charity” schemes is critical. In this article, we’ll show you how to document and deduct an investment‐related scam on your 2025 return.

Theft-Loss Deduction Basics Under TCJA

Tax Cuts and Jobs Act (2017–2025) suspended most personal casualty and theft loss deductions, except if the loss occurred in a federally declared disaster area. However, in March 2024, IRS Chief Counsel clarified that losses from “for-profit transactions” can still qualify as theft losses if they meet these conditions:

  1. Theft Must Involve Property Held for Profit (e.g., stocks, crypto, debentures).

  2. Direct Financial Intent by the taxpayer—demonstrating they engaged in the transaction to gain profit.

  3. Proof of Deception—evidence that the “investor” was misled by false promises of high returns.

External Link: IRS Chief Counsel Memorandum on Theft Loss Deductibility

Common Sunrise FL Scam Scenarios

  1. Crypto “Pig Butchering” Schemes

    • Victims are lured into fake crypto platforms, deposit funds, and find they cannot withdraw.

    • Because you intended to profit, this falls under “theft” for § 165.

  2. Compromised-Account Hacks

    • Cybercriminals gain access to your retirement or brokerage account via phishing.

    • Funds are transferred out under false pretenses—deductible if you held those assets to earn a return.

  3. Ponzi & Pyramid Investments

    • Promised “guaranteed returns” on foreign stock picks or private placements.

    • When payments stop, you have a theft loss, not a capital loss.

Example: In June 2024, a Sunrise resident lost $25,000 in a Ponzi‐style scheme disguised as a real‐estate investment. Because they intended to profit, they claimed the loss on their 2023 return—reducing their AGI by $25,000 (subject to AGI limitations on itemized deductions).

When a Florida Scam Is Non-Deductible

  • Romance Scams: Sending money because you believed you were sending support to a love interest—a “lust-driven” loss.

  • Charitable Frauds: Donating to a fake charity—loss is non-deductible unless the organization was registered and eligible for charitable contributions.

How to Claim a Sunrise FL Scam Loss in 2025

  1. Determine Eligibility

    • Confirm you held the “property” (crypto, stocks, retirement funds) to produce income or profit.

    • If it was purely emotional or charitable, it’s non-deductible.

  2. Document Thoroughly

    • Secure bank statements showing the transfer.

    • Save email correspondence or chat logs from the scammer.

    • File a local police report in Broward County and obtain an incident number.

  3. Report on Schedule A (Form 1040)

    • Line 20: Enter “Theft Loss” under “Other Itemized Deductions.”

    • Attach a detailed statement:

      • Date of theft (e.g., September 12, 2024)

      • Description of property (e.g., Bitcoin, Ethereum)

      • Fair market value before theft ($25,000)

      • Adjusted basis (what you paid-in) if different from FMV

      • Description of how you were deceived (e.g., “Promised 30 percent monthly returns via xyzcrypto.app”).

  4. Consider Local Disaster Exceptions

    • If the theft coincided with a federally declared disaster in Florida (e.g., hurricane‐related theft), reference Form 4684.

    • Otherwise, it’s a standalone theft loss claim.

Sunrise FL Example: “Crypto Account Hack”

  • Scenario: In August 2024, Jane Doe of Sunrise transferred $10,000 in Bitcoin to a false “HashWave Invest” platform. By October, she discovered her account was drained.

  • Actions Taken:

    1. Filed a Broward County police report (Case No. BC24-0456).

    2. Documented all bank and crypto-wallet transactions in a digital folder.

    3. Claimed a $10,000 theft loss on her 2023 Schedule A, reducing her taxable income and saving $2,400 in federal tax at the 24 percent bracket.

Internal & External Resources

Conclusion

If you’ve fallen victim to an investment scam in Sunrise, FL, you may recoup losses via a theft-loss deduction—even under TCJA rules—provided you document and report correctly. For help determining eligibility or filing your theft-loss deduction, our Sunrise FL tax planning experts are here to guide you. And to uncover additional tax-saving strategies, try our Tax Strategy Finder today.