Felzkowski Protects Victims

Wisconsin Moves to Protect Scam Victims from a Second Financial Hit

In a move that blends common sense with compassion, Wisconsin has taken a meaningful step to protect victims of financial exploitation from being penalized twice—first by criminals, and then by the tax system. A new law, enacted in early April, allows individuals who have lost money to scams or exploitation to avoid paying state income taxes on those losses.

It’s a change rooted in reality—and in fairness.

When Losing Everything Isn’t Enough

For victims of financial exploitation, the damage often extends far beyond the initial loss. Retirement accounts drained. Savings wiped out. Years of careful planning erased in a moment of deception.

But for many, the nightmare didn’t end there.

Because those stolen funds were often withdrawn from taxable accounts, victims could still be on the hook for state taxes—as if the money had been legitimately used. In some cases, that meant facing steep tax bills on income they never truly had. For at least one Wisconsin resident, it even led to a lien being placed on their home.

It’s the kind of outcome that doesn’t sit right with most people—and now, it doesn’t have to.

A Law Inspired by Real Life

The effort to fix this issue was led by Senate President Mary Felzkowski, who brought forward legislation after hearing firsthand from a constituent who had lost his entire retirement savings to a scam.

The financial devastation was already overwhelming. But being told he still owed taxes on that money added another layer of hardship—one that felt avoidable.

Felzkowski’s response was straightforward: the system needed to reflect reality. If money is stolen, it shouldn’t be treated the same as income someone actually benefited from.

That principle is now written into law.

How the Fix Works

Under the new provision, individuals can subtract losses tied to financial exploitation from their Wisconsin taxable income, provided certain conditions are met.

The loss must come from a financial account and must have been counted as income at the federal level. It also must be reported to law enforcement, with no reasonable expectation that the money will be recovered through legal action, insurance, or other means.

The timing matters, too. The subtraction applies to the year the funds were taken, aligning the tax treatment with when the loss actually occurred.

And if a victim does recover some of that money down the road, it gets added back into taxable income—keeping the system balanced without undermining the relief.

A Practical Step Toward Fairness

Financial scams have become more sophisticated and more widespread, targeting people from all walks of life. Older Americans, in particular, are often hit hardest, with retirement savings serving as prime targets for bad actors.

While law enforcement continues to pursue those responsible, this new approach acknowledges something just as important: victims shouldn’t be left cleaning up a mess that wasn’t their fault.

By adjusting how these losses are treated under state tax law, Wisconsin is offering a measure of relief that goes beyond dollars and cents. It’s about recognizing the difference between income and injustice.

And in doing so, the state is sending a clear message—being a victim shouldn’t come with an added price tag.