Although your foreign bank account has lost value during the year, you still have reportable foreign interest income. The loss in the value of your account is a capital loss and does not offset the income you received.
General Rules Regarding Foreign Income
1. What foreign income is taxable on my U.S. return?
If you are a U.S. citizen or resident, you are required to report your worldwide income on your tax return. This means that you must not only report income you receive from U.S. sources, but you must also report income you receive from foreign sources.
2. Where do I report the foreign income on my return?
Generally, you report your foreign income where you normally report your U.S. income on your tax return. Earned income (wages) is reported on line 7 of Form 1040; interest and dividend income is reported on Schedule B; income from rental properties is reported on Schedule E, etc.
You must express the amounts you report on your U.S. tax return in U.S. dollars. Therefore, you must translate foreign currency into U.S. dollars if you receive income or pay expenses in a foreign currency. In general, use the exchange rate prevailing (i.e., the spot rate) when you receive, pay or accrue the item. You may also use the yearly average exchange rate. You may find this link helpful (https://data.imf.org/regular.aspx?key=61545850).
Answers are correct to the best of my ability but do not constitute legal or tax advice.
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