topic Do I need to report currency gains from foreign mortgage refinancing in Deductions & credits

Do I need to report currency gains from foreign mortgage refinancing

iamallen — Sat, 01 Jun 2019 06:45:23 GMT

I purchased Singapore home in 2013 and got mortgage from HSBC bank. I refinanced in 2016 from OCBC bank but didn't sell my home. The currency SGD depreciated by 10%. Do I need to report this "gain" and pay tax? If so, where?

Actually, you don't have to report this anywhere on your...

GeoffreyG — Sat, 01 Jun 2019 06:45:25 GMT

Actually, you don't have to report this anywhere on your US tax return, or pay any US tax on it. The fact that you experienced a currency gain on the mortgage refinancing, if you will, is incidental to the refinancing process of an overseas property.

If, instead, you had been trading or speculating directly on foreign currencies or currency contracts, such as the US dollar / Singapore dollar exchange cross, then that would be a reportable (and taxable) gain or loss. However, in this instance, that doesn't apply. Similarly, if you had experienced a net currency loss on the mortgage refinancing, in lieu of a gain, then that wouldn't be a tax deducible event either.

Where US tax reporting is applicable in this matter, is just where you would otherwise expect it to be. First, there is the potential to deduct mortgage interest if this is your first or second home. Second, if and when you sell your Singapore property, you may have a capital gain (the US taxes on which may be mitigated or eliminated by an IRC Section 121 exclusion). There are some links provided below that will take you to where you can read more about both of these topics.

https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Deducting-Mortgage-Interest-FAQs/INF12051.html

https://www.irs.gov/taxtopics/tc701.html

Thank you for asking this question.

The previous answer is incorrect. Per IRC §988, the gain...

robleder — Sat, 01 Jun 2019 06:45:27 GMT

The previous answer is incorrect. Per IRC §988, the gain on a debt repayment resulting from a favorable exchange rate move is a taxable event, considered separately from any gain or loss that arises from the (eventual) sale of the property.

I agree. The recommended answer is incorrect. Foreign m...

brettcummings — Sat, 01 Jun 2019 06:45:29 GMT

I agree. The recommended answer is incorrect. Foreign mortgage currency gains are taxable income.

Re: Do I need to report currency gains from foreign mortgage refinancing

Byrdewear — Sat, 16 May 2020 13:27:38 GMT

Hi Iamallen

could I ask what happened to this at the end? Did you end up reporting?
My understanding is personal transactions fall outside the scope of section 988 and need only to be reported if you sell the property?

thanks