The newly issued tax guidelines follow the lead of the Internal Revenue Service, which in March said investors can claim the losses as theft, which allows higher deductions than capital, personal theft and personal casualty loss.

Those who have filed their 2008 state tax returns can submit amended returns, officials said Monday.

But how much fraud can be written off would be limited by New York's tax laws on itemized deductions. Itemized deductions are reduced by up to 25 percent for individuals who make more than $100,000 in adjusted gross income, and for married taxpayers with more than $200,000 in adjusted gross income. It's reduced by up to 50 percent for all filers making more than $475,000 in adjusted gross income.

Then, for the 2009 tax year, those with adjusted gross income of more than $1 million would receive no noncharitable itemized deductions -- that means no theft deductions -- but could claim 50 percent of charitable contributions.

The new federal and state tax guidelines came in response to the Madoff scam, and to the $413-million Ponzi scheme allegedly masterminded by Nicholas Cosmo, president of Agape World Inc., a Hauppauge-based firm that made high-cost bridge loans.

Many victims of both schemes, bereft of retirement funds and forced to sell their properties, have been hoping for write-offs of their original investments and phantom investment income.