How Do I Calculate Exchange Rates for My US Expat Tax Return?

When converting foreign income or expenses into US dollars on your tax return, the IRS allows two main methods:

1. Spot Rate Method

You may use the exchange rate on the exact date the income was received or the expense incurred.

• This is known as a “spot rate.”
• If you use this method, be consistent and use spot rates throughout your entire return.

2. Annual Average Exchange Rate (IRS-Approved)

You can also use the IRS’s yearly average exchange rate for the full tax year, especially if income was received regularly throughout the year.

See the IRS annual average exchange rates here

What to Include in Your Greenback Questionnaire

When completing your Greenback Tax Companion questionnaire, it’s perfectly fine to:

• Report amounts in the foreign currency
• Clearly label the type of currency used (e.g., GBP, EUR, CAD)

Your Greenback accountant will handle the currency conversions using IRS-approved methods to ensure consistency and accuracy on your return.

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