Forex gains & losses on Earned Income Abroad

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Toucan3
Posts: 13
Joined: Sun Jul 29, 2018 9:49 am

Forex gains & losses on Earned Income Abroad

Post by Toucan3 » Thu Apr 11, 2019 10:21 am

Hello all,

US citizen here about to accept an offer abroad earning my salary in a foreign currency. I think I have a decent understanding of how I´ll be taxed on my income in both countries but the part that is still not clear to me is how, if at all, I´d be taxed on any foreign exchange gains and/or losses when I decide to transfer my EUROS/etc to USD.

In other words if my salary were theoretically 100K EUROs which at todays exchange rate (lets assume I get paid once a year today) converts $113K USD and 6 months from now I want to transfer these 100K EUROs to my US $ account and at that time it´s worth $120K USD due to the strengthening of the EURO, will this 7K USD be a taxable income on my US return? What about the opposite (ie the EURO weakens & it only translates to 105K USD)? Would I then get a tax credit for this $8K loss? Can I carry-forward that loss on forex to future years? Can it be used to offset other types of income or just forex gains?

I greatly appreciate any insight you all can provide! I´ve tried to research this a bit on my own but I´m getting a bit confused as most of the articles I´m finding pertain to businesses rather than individuals.

Thanks again,

Toucan

typical.investor
Posts: 1345
Joined: Mon Jun 11, 2018 3:17 am

Re: Forex gains & losses on Earned Income Abroad

Post by typical.investor » Thu Apr 11, 2019 10:30 am

I don’t believe you should pay taxes or claim a loss on currency movement if you are not a trader. I never have.

I think you can use exchange rates either when money came in or the yearly average to get the lowest amount of income.

Skiandswim
Posts: 119
Joined: Tue Dec 21, 2010 3:24 pm

Re: Forex gains & losses on Earned Income Abroad

Post by Skiandswim » Thu Apr 11, 2019 10:57 am

In your example, I am assuming you are only making a cash bank deposit in Euros from your paycheck and later transferring some of funds to US bank in USD. I don't believe there is any exchange reporting . If you are moving overseas you should consult a tax advisor!

If you make bond / equity investments in Euros and subsequently sell them, the tax treat can be more complex (refer to IRS section 988 https://www.investopedia.com/terms/s/section-988.asp).

PS - I have never attempted to forecast exchange rates while living overseas. I just budget expense based on what is required in local versus USD currency throughout the year.

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