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  • Writer's pictureLewis Grunfeld, CPA

2023 IRS Exchange Rates

Updated: 5 days ago

When it comes to filing your expat taxes, a critical step involves converting your foreign income into US dollars. This process requires a clear understanding of the foreign exchange rates as recognized by the Internal Revenue Service (IRS). Here's an insightful guide to navigating this essential aspect of your tax preparation.

​Key Takeaways

  • U.S. tax reporting requires currency conversion into USD.

  • The IRS doesn't have an official exchange rate but consistency is important.

  • For FBAR, use the year-end U.S. Treasury rate.

Understanding the Need for Currency Conversion

Why is currency conversion necessary for American expats? The answer lies in the requirement set by the U.S. government: all taxpayers, regardless of residence, must report their income in U.S. dollars when filing federal tax returns. This mandate ensures consistency in income reporting and allows for a standardized approach to tax assessment.


Example

Alex, a U.S. citizen, resides in the United Kingdom and has earned a salary of £50,000 during the year 2022. As an American expatriate, he is required to report his income in U.S. dollars on his U.S. tax return, even though his earnings are originally in British pounds (GBP).

  • Total Income in GBP: Alex's annual earnings for the year 2022 amount to £50,000.

  • Exchange Rate Selection: For the purpose of simplicity and maintaining consistency in his tax reporting, Alex opts to utilize the IRS's average annual exchange rate. For the year 2022, the established rate is 0.811, indicating that each U.S. dollar equates to 0.811 British pounds.

  • Income Conversion to USD: To ascertain the U.S. dollar equivalent of his salary, Alex performs the following calculation: £50,000 (total income) ÷ 0.811 (exchange rate) = $61,650.43

Thus, Alex is obliged to report $61,650.43 as his income on his U.S. tax return for the year 2022.


The IRS Exchange Rates

The IRS permits the use of various rates, provided they are applied consistently. For instance, taxpayers can use the daily exchange rate available on the transaction date, which is ideal for isolated or infrequent transactions. For regular income, such as salaries or consistent freelance payments, the IRS average exchange rate as published by the IRS is often more practical, as it reflects an aggregate rate over the entire year. Other sources such as the Treasury Department, Federal Reserve Bank, and credible online platforms like Oanda.com, xe.com, and x-rates.com are acceptable as well. It's crucial that whichever source or rate used, the approach is consistent and justifiable to the IRS.


Table of IRS Exchange Rates

C​ountry

Currency

2023

2022

2021

Afghanistan

Afghani

82.635

90.084

83.484

Algeria

Dinar

135.933

142.123

135.011

​Argentina

Peso

296.154

130.792

95.098

Australia

Dollar

1.506

1.442

1.332

Bahrain

Dinar

0.377

0.377

0.377

Brazil

Real

4.994

5.165

5.395

Canada

Dollar

1.35

1.301

1.254

Cayman Islands

Dollar

0.833

0.833

0833

China

Yuan

6.73

6.73

6.452

Denmark

Krone

6.89

7.077

6.29

Egypt

Pound

30.651

19.208

15.697

Euro Zone

Euro

0.924

0.951

.846

Hong Kong

Dollar

7.829

7.831

7.773

Hungary

Forint

353.02

372.775

303.292

Iceland

Krona

137.857

135.296

126.986

India

Rupee

82.572

78.598

73.936

Iraq

Dinar

1376.529

1459.751

1460.133

Israel

Shekel

3.687

3.361

3.232

Japan

Yen

140.511

131.454

109.817

Mexico

Peso

17.733

20.11

20.284

New Zealand

Dollar

1.63

1.578

1.415

Norway

Kroner

10.564

9.619

8.598

Singapore

Dollar

1.343

1.379

1.344

South Korean

Won

1306.686

1291.729

1144.883

Sweden

Krona

10.613

​10.122

8.584

Switzerland

Franc

0.899

0.955

0.914

Taiwan

Dollar

31.16

29.813

27.932

UAE

Dirham

3.673

3.673

3.673

UK

Pound

0.804

0.811

0.727

Exchange Rates for Foreign Asset Reporting

For U.S. taxpayers with foreign financial assets, the Foreign Bank and Financial Accounts Report (FBAR) and Form 8938 (Statement of Specified Foreign Financial Assets) are crucial components of their tax reporting obligations. When it comes to valuing these foreign assets in U.S. dollars for the purpose of these forms, the IRS mandates the use of the year-end U.S. Treasury exchange rate.


Need Help With Your US Expat Taxes?

At CPAs for Expats, we combine deep expertise with affordability, standing out as the lowest cost service for U.S. expatriates. Our 4.9/5 rating on independent review platforms attests to our commitment to excellence and client satisfaction. Contact us today, and let our experts simplify your tax management process, providing peace of mind and significant savings!





Article by Lewis Grunfeld, CPA

Lewis Grunfeld, CPA, is a renowned expert in international and U.S. expat taxation, with expertise spanning over ten years. He has successfully helped thousands of expats around the world navigate complex international U.S. tax regulations, and achieve significant tax savings. His work is driven by a strongly rooted passion for assisting the expat community through a wide range of tax situations, ensuring tailored solutions for each unique situation.

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