FORM 8938 - Income, Deductions or Credits

[Josefh]

Hello, TurboTax's FORM 8938 asks if my Foreign Financial Accounts had income, deductions or credits associtaed with them in 2024. I don't understand what FORM 8938 is asking here. In other words, what income, deductions or credits the form is referring to? Thank you !

[DaveF1006]

Form 8938, also known as the "Statement of Specified Foreign Financial Assets," is used to report your foreign financial assets to the IRS. When the form asks if your foreign financial accounts had income, deductions, or credits associated with them, it is referring to any financial activity related to those accounts. Here are some examples:

1. Income: This includes interest, dividends, capital gains, rental income, or any other type of income generated from your foreign financial accounts.
2. Deductions: These could be expenses related to managing or maintaining your foreign financial accounts, such as fees or commissions.
3. Credits: This refers to any foreign tax credits you might be eligible for due to taxes paid to a foreign government on income earned from your foreign financial accounts.

Essentially, the form is asking if there was any financial activity in your foreign accounts that needs to be reported on  tax return. If your accounts were dormant during the year without any financial activity, then you would say no to this question.

[Josefh]

Thank you, Dave, for your answer! I understand now this part of FORM 8938 is asking if there was any financial activity in my foreign financial accounts that needs to be reported on tax return, but not every financial activity needs to be reported on my tax return, right? For example, bank account maintenance fee doesn't have to be reported, isn't that true? Thank you once again 🙏 !

[SusanY1]

You are correct that items like bank fees are not reported on your tax return.  For the Form 8938, it is looking for information such as interest, dividends or other income related to the accounts that you are reporting.