Romance scams are among the most devastating forms of financial fraud. Victims not only lose money — often life savings — but also suffer profound emotional harm from a relationship they believed was real. What many victims do not know is that depending on how the scam unfolded, they may qualify for a federal tax deduction under IRC Section 165(c)(2). You deserve every form of recovery the law allows, and there is absolutely no shame in seeking it.
Understanding How Romance Scams Work
Romance scammers invest weeks or months building a believable relationship, often through dating apps, social media, or even accidental text messages. They create elaborate personas — typically presenting as successful professionals working overseas, military personnel, or widowed individuals. Once trust is established, they introduce a financial crisis or an investment opportunity, and requests for money begin.
The emotional manipulation involved in these scams is sophisticated and intentional. These are professional criminals, and falling victim to their tactics is not a reflection of your intelligence or character.
When a Romance Scam Has an Investment Element
For a romance scam loss to qualify under IRC Section 165(c)(2), there generally needs to be an investment element — meaning the scammer directed you to transfer money with the expectation of a financial return. Common investment framings include:
- A cryptocurrency trading platform or “investment opportunity” the scammer introduced
- A business venture, forex trading account, or commodity investment
- Real estate or high-yield investment plans presented by the scammer
- Requests to send funds to a specific account so “profits” could be reinvested
If the scammer framed your transfers as investments — even if no real investment ever existed — this profit-motive element may support a Section 165 deduction.
Pig Butchering: The Romance-Investment Hybrid
A particularly common form of romance scam today is known as “pig butchering” (from the Chinese phrase sha zhu pan). In these schemes, the scammer combines romantic relationship-building with fake cryptocurrency trading. Victims are gradually introduced to a “lucrative” crypto platform, encouraged to make small deposits that show phantom profits, then pressured to invest more before the platform disappears along with all funds.
Pig butchering victims often have an especially strong case for an IRC 165 deduction because the profit motive is explicit and documented throughout the scheme. Fake account statements showing returns, pressure to reinvest “profits,” and the existence of a purported trading platform all support the investment-loss characterization.
What About Money Sent as Gifts or Emergency Help?
If money was sent purely as a gift or emergency help — with no investment framing — it may not meet the profit-motive requirement for a Section 165(c)(2) deduction. However, many romance scam situations are mixed: some transfers were framed as investments, others as loans or gifts. A qualified CPA can analyze the totality of your situation and identify which transfers may be deductible.
Documentation That Helps Your Case
Even if you deleted messages out of embarrassment, partial records can still support a deduction. Useful documentation includes:
- Bank records, wire transfer receipts, or ACH confirmation showing funds transferred
- Any cryptocurrency transaction records or exchange account history
- Screenshots of the fake investment platform or account statements you received
- Saved emails, texts, or chat logs showing the investment framing
- A police report or complaint filed with the FTC or FBI IC3
Strict Confidentiality — Always
We understand that many romance scam victims feel a sense of shame or embarrassment that prevents them from seeking help. Please know that your case is handled with complete professionalism and sensitivity. All consultations and engagements with Shurek Accounting & Tax are strictly confidential, protected under CPA-client confidentiality. What you share stays between you and your CPA — always.
You were targeted by sophisticated criminals who exploit human trust. You deserve both emotional support and every legal avenue available to recover what was taken from you.
Can You Amend Past Returns?
Yes. If you suffered a romance scam loss in a prior tax year and did not claim it, you generally have three years from the original due date of the return to file an amended return using Form 1040-X. A CPA experienced in Section 165 can evaluate your situation and help you determine whether amending is beneficial.
Ready to find out if your scam loss qualifies for a tax deduction?
Contact Shurek Accounting & Tax for a free consultation. All consultations are free and strictly confidential — protected under CPA-client confidentiality.