Foreign Fixed Deposit interest

Forum|Forum|3 years ago
January 10, 2023
2 replies
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I have accrued some interest on my foreign bank fixed deposit (FD). This is a savings investment vehicle like a CD. Want to understand how to report interest for IRS this year. As an example, if I invested $100 a year back, earned $20 interest but let's say due to currency exchange losses my $100 principal is now effectively $90. I have 2 options, which one should I do:

1. Report interest of $10 as that is effectively what I made as interest after addressing the currency devaluation.

2. Report interest of $20 but then report a currency loss of $10 in Schedule D (as it is an investment not a personal thing).

What is the right answer here?

Thanks in advance for the help!

Not A Product Question

Anonymous_

Employee

@pk12_2 may be able to help.

pk12_2

Employee

@gohawksseattle ,

(a) what country are your CD/ FD held in ? And is it in local currency or in US$ ?

(b) Are you a US person ( citizen / Green Card / Tax Resident )

Generally as a US person , unless you are a currency dealer / FX investor, your operating currency is US$ and therefore exchange losses to the principle are ignored , while gains are taxed. But here agian depending on the facts and circumstances and treaty conditions things may change.

I will come back once I hear from you