Tax reporting of foreign currency gains/losses - Am I doing this correctly?

Hi all,

Could someone please confirm or correct my approach to reporting foreign currency gains and losses.

I am not actively “trading” foreign currencies, but rather I am receiving foreign currency both through dividend income from foreign stocks and sometimes through selling such positions in foreign stocks and then converting the foreign currency to USD via forex trades.

Here’s an example of what I’m doing:

  • Company XYZ pays a dividend of 100 Euro.
  • When I convert those 100 Euro to USD via a forex transaction, I receive 112 USD, net of fees.
  • My broker on the 1099-DIV reports this dividend transaction as 110 USD. (The 1099-DIV itself of course only has aggregate numbers, but my broker provides supplementary information about each individual transaction.). I use this 1009-DIV amount as the cost basis for my forex transaction.

So in the example above I would log a currency gain of 2 USD (net sales proceeds of 112 USD minus 1099-DIV amount of 110 USD) for this transaction.

At the end of the year I aggregate all individual foreign currency gains/losses over all such foreign currency transactions in the tax year and report this as an IRC 988 gain or loss, depending on whether the net currency gain is positive or negative.
(According to this post this is reported as “Other Reportable income” in TurboTax )

My questions:

  1. Is this an appropriate approach to reporting of my foreign currency gains/losses or should I be doing something different?

  2. Using this approach my foreign currency gains/losses are typically rather small, e.g. my currency gains for 2022 are likely around USD 14 to 15 (pending what the 1099-DIV breakdowns will say).
    I’ve read that for “personal transactions” foreign currency gains below $200 are not taxable (and presumably neither are losses of less than $200 deductible). Does this exception apply here? Or are there any other minimum amounts below which currency gains are not reportable or currency losses are not deductible?

Thanks in advance for any help with this,

1 Like