Reporting Currency exchange losses for an American Expat

[patamelia]

Hello,

In 2024, I  transferred some inheritance money from America to the foreign Country-A where I live. I received that money in stages in dollars on a certain day and exchanged it on another day in a few transactions.

Because of the falling Dollar value, I had currency exchange losses of xxxx dollars in Country-A.  How can I enter this on my US Taxes.  Should I reconvert the foreign losses to dollars again with the exchange rate when the money arrived in Country-A in reverse or can I use the Country-A loss multiplied by the IRS yearly average exchange rate.

Do I use Schedule D and form 8949 or whatever. I have to calculate, but have proof of all exchanged.

On 8949 (C): Short term transaction not reported on 1099-B

Description of Property : US Dollars

Gain or loss -$xxxx

Is there a special form for currency losses?  

Thanks in advance for any help

[baldietax]

if my FX math is right (feel free to correct), unless this is some specific currency which got weaker agains the dollar, in general if you converted USD in 2024 and the $ weakened, you should have a gain in USD terms not a loss?

on 1/1/24, 1 USD = 0.90599 EUR

on 7/29/25, 0.90599 EUR = 1.05 USD.

I don't think converting to a different currency and not back to USD creates a gain/loss based on FX rate changing, you just have a different currency.

If you move it back to USD maybe it's a taxable event this is covered by Section 988 of the tax code which has certain exclusions around 'personal' transactions.  I've had FX losses in the past on currency conversion from USD and back to USD, which a CPA advised me were not something I could take on my taxes, but I'm not sure if that advice was correct.

If you are looking at significant amounts you may want to consult a CPA on this topic.  Try reddit r/tax and r/irs forums also.

[NCperson]

@patamelia not my area of expertize, but why would this be tax deductible in any event? 

If you received the money in US dollars and then you state you converted it (presumably to the currency in Country A).  

Then what occured? if the dollar ROSE, then your currency in County A would be worth LESS if you converted it back, but that is all on paper.  Where is the actual loss? 

From your comments sounds like you still are holding the local currency.

If you convert back to US dollars, yes, that is when the loss becomes "real".   But I do not believe that is deductible in any event as it is a personal loss. 

Are you using this currency in a trade or business? then that would be different.   

Encourage others to challenge my logic here.