In a June 18, 2024 Technical Interpretation, the Canada Revenue Agency (CRA) clarified a difficult truth for scam victims: losses from personal scams are not tax deductible. While some investment-related frauds may qualify for limited tax relief, personal scams—such as phishing or grandparent scams—do not meet the criteria under Canadian tax law.

Examples of Personal Scams

CRA highlighted two common types of personal scams:

• Grandparent Scam: A fraudster impersonates a grandchild in distress, urgently requesting money for emergencies like accidents or kidnappings.
• Phishing Scam: A scammer poses as a trusted organization (e.g., a bank or the CRA) to trick victims into sharing sensitive information or transferring funds.

These scams are emotionally manipulative and financially damaging, but they lack any connection to income-generating activity.

Why No Tax Relief?

CRA explained that losses from personal scams typically involve personal-use property, such as cash or savings. Under subparagraph 40(2)(g)(iii) of the Income Tax Act, any loss from the disposition of personal-use property is deemed to be nil—meaning it cannot be claimed as a deduction.

Because these scams do not involve employment, business, or investment activity, the losses do not qualify as business or capital losses.

Investment Scams: A Different Story

In contrast, investment scams may result in deductible losses if the taxpayer can prove the investment was legitimate and tied to a business or capital asset. Even then, CRA and the courts apply strict criteria to determine eligibility.

Takeaway for Taxpayers

If you’ve been scammed personally, the tax system offers no relief. The best defense is prevention—stay informed, verify identities, and report suspicious activity. For complex cases involving potential investment fraud, consult a tax professional to explore your options.