What exchange rate do I use for taxes?

You must express the amounts you report on your U.S. tax return in U.S. dollars. Therefore, you must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item.

Where would you go to get the foreign exchange rate needed to prepare a tax return needing conversions to the US dollar?

You can generally get exchange rates from banks and U.S. Embassies. If your functional currency is not the U.S. dollar, make all income tax determinations in your functional currency.

How do you convert foreign money to U.S. dollars?

To convert from foreign currency to U.S. dollars, divide the foreign currency amount by the applicable yearly average exchange rate in the table. To convert from U.S. dollars to foreign currency, multiply the U.S. dollar amount by the applicable yearly average exchange rate in the table.

Is there tax on foreign currency exchange?

Tax on Currency Exchanges Basic currency is taxed at ordinary income rates no matter how long the company holds it before selling. Currency held for investment purposes is taxed at capital gains rates. If the company has held the currency for more than one year, the gain is taxed at the long-term capital gains rate.

Where can I exchange foreign currency for US dollars?

Your bank or credit union is almost always the best place to exchange currency.

• Before your trip, exchange money at your bank or credit union.
• Once you’re abroad, use your financial institution’s ATMs, if possible.
• After you’re home, see if your bank or credit union will buy back the foreign currency.

Is foreign currency gain taxable?

Holding foreign currency in an investment portfolio also can generate taxable gains and losses. Losses are fully deductible from ordinary income, without limits, and gains are taxable at ordinary income rates.