IRS exchange rates: Guide to foreign currency conversion for US taxes

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise US Inc. or its affiliates, and it is not intended as a substitute for obtaining business advice from a Certified Public Accountant (CPA) or tax lawyer.

If you earn income in EUR, MXN, or any other foreign currency, you still need to report it to the IRS in USD. To do that, you need to use IRS-approved exchange rates.

If you're not sure what these IRS exchange rates are, where to find them, and how to convert your foreign earnings accurately, this guide explains everything you need to know as a US expat or someone who has foreign financial assets.

We'll also introduce the Wise account, which allows you to send, spend, and receive your money across the globe in over 40 currencies – all at the fair mid-market rate.

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Table of contents
What is the IRS foreign exchange rate? Why is the IRS exchange rate important for foreign tax filing? When do I need to use an exchange rate when filing taxes? FBAR and FATCA Finding the right exchange rate for your tax return Yearly average IRS exchange rate Spot rates Special rates for FBAR reporting How do I convert foreign currency to USD with the IRS? IRS exchange rates: FAQs

What is the IRS foreign exchange rate?

This might be surprising, but there's no IRS currency exchange rate. According to the agency's website, ""The Internal Revenue Service has no official exchange rate."¹

So, how are you supposed to convert your foreign income or assets into USD for tax filings? Instead of setting their own exchange rates, the IRS allows you to use any publicly available exchange rate, as long as you apply it consistently across your tax return.

For example, you could use rates from your bank, a currency exchange website, or the yearly average rates that the IRS publishes as a reference on its website.

However, you can't cherry-pick different rates for different transactions to minimize your tax bill. Pick a reputable source, and stick with it for all relevant transactions.

Why is the IRS exchange rate important for foreign tax filing?

All US tax forms require amounts in USD. If you live in London and earned 50,000 GBP last year, you can't just write this foreign income amount on your US tax return. You need to convert it to USD first.

This applies to more than just your salary. Any foreign income, such as rental income, investment gains, retirement distributions, and interest from foreign bank accounts, must be converted to USD.

Without accurate currency conversion, you can't complete your tax return. Filing an inaccurate return can trigger fees and other serious penalties.

When do I need to use an exchange rate when filing taxes?

Here are a few examples of the situations when you'll need to convert foreign currency to USD:

• Income reporting: Any wages, self-employment income (including freelancing), or business profits that you earned in foreign currency

• Foreign assets: This includes foreign bank accounts, investment accounts, real estate property, and other assets, especially if you earn income from them or if they pass certain thresholds

• Investment transactions: Sales of foreign stocks, bonds, or real estate usually need conversion, both for the sale price and the original purchase price, to calculate your capital gains

• Deductions and credits: Foreign taxes paid, charitable contributions made in foreign currency, or business expenses abroad all require conversion

Essentially, any income you earn in a foreign currency or country is subject to your US tax obligations, even if you don't live in the US anymore.

💡 Learn more about US taxes for citizens living abroad in our full guide.

FBAR and FATCA

Beyond your tax return, you may also need to convert foreign currency for two important reporting requirements: FBAR and FATCA.

FBAR (Report of Foreign Bank and Financial Accounts) is a separate filing through FinCEN, not the IRS. If your foreign financial accounts are over 10,000 USD at any point during the year, you must file FinCEN Form 114.²

You'll need to report the maximum value of each account in USD.

FATCA (Foreign Account Tax Compliance Act) requires you to file Form 8938 with your tax return if your foreign financial assets exceed certain thresholds. All your asset values will need to be converted to USD.³

These aren't tax requirements, so you won't actually pay anything. You just need to file these forms for reporting purposes.

Finding the right exchange rate for your tax return

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Yearly average IRS exchange rate

When you receive income steadily throughout the year, you should use the yearly average exchange rate for that tax year to convert foreign currency into USD.

The IRS publishes the yearly average exchange rates for converting major foreign currencies into USD.

You'll use yearly average rates for:
Regular salary or wages from foreign employment Monthly rental income from foreign properties Quarterly dividends from foreign investments Ongoing business revenue Pension or retirement income

Essentially, for all steady worldwide income, you can use the yearly average currency exchange rate.

For example, if you worked in Germany all year and received biweekly paychecks in EUR, you'd use the yearly average EUR-to-USD rate for 2024 when filing your 2024 tax return.

Spot rates

For one-time transactions that happen on a certain day, use the posted exchange rate from that same day. You can get daily rates from banks, currency exchange platforms, or financial websites.

Here are a few examples of what you can use spot rates for:
Sale of a foreign property One-time business sale or a contract payment Inheritance received in a foreign currency Large bonus paid on a specific date Foreign lottery or gambling winnings

In other words, you'll use spot rates for any foreign income that you earned only once instead of as regular income.

For example, if you sold an apartment in Tokyo on March 15, 2024, you'd use the JPY-to-USD exchange rate from March 15 to report that transaction, not the yearly average.

Special rates for FBAR reporting

For FBAR reporting, you must use the US Treasury's Financial Management Service rates, specifically the rate from December 31 of the reporting year.⁴

You can find these rates at the Treasury's fiscal data website.

You'll calculate the maximum value your foreign account reached at any point during the year in the foreign currency, and then convert it using the December 31 rate.⁴

If the Treasury doesn't publish a rate for your currency, you can use another verifiable exchange rate, but make sure to document your source.

How do I convert foreign currency to USD with the IRS?

To convert foreign currency to USD, you'll need to divide the foreign amount by the exchange rate.

Follow this formula:

Foreign currency amount ÷ Exchange rate = US dollars

For example, let's say you earned 500,000 MXN in salary during 2024. The 2024 yearly average IRS exchange rate for Mexican pesos is 18.330.¹

Let's do the calculation: 500,000 ÷ 18.330 = 27,284.33

You'd report 27,284 USD in income on your US tax return.

Need to pay your US taxes as an expat? Have foreign income? Meet Wise

Paying for your US taxes or receiving a tax refund can be tricky — the payment options are often slow and costly, and this doesn’t get better when you’re not in the country and/or manage different currencies.

Whether you’re a US expat, a resident alien, or you have a foreign business, Wise can be an excellent option. With a Wise account, you can either pay your taxes from abroad or receive your tax refund easily. And if you manage more than one currency, you’ll save a lot on exchange rate markups and conversion fees.

When you fill out your tax forms, use your Wise USD Account and routing numbers.

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Use direct debit to pay your taxes straight from your Wise account, avoiding the fees from other payment methods offered by the IRS Set up a direct deposit, the fastest way to receive your tax refund, to your Wise USD account details

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IRS exchange rates: FAQs

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What is the current IRS exchange rate?

The IRS doesn't have a single "current" exchange rate because it doesn't set official rates. However, it publishes yearly average rates for each tax year, which you can find on their website. These rates average out the daily fluctuations throughout the year.

If you need a certain day's rate for a specific transaction, you'll need to get it from a bank, currency exchange service, or financial website. Just make sure you're using a reliable source and document it.

How often does the IRS update its exchange rate?

The IRS updates its yearly average exchange rate table once per year, usually after the tax year ends. For example, the 2024 rates typically become available after December 31, 2024, once the IRS calculates the average for the full year.

The IRS doesn't keep or update daily exchange rates.

Where can I get official exchange rates?

There are a few different ways to get reliable exchange rates, though there isn't really an "official" one.

The IRS publishes yearly average rates on its website for major currencies, and for FBAR filing, you can use the Treasury's Financial Management Service rates. Your bank can provide rates for specific dates, and many financial websites publish daily rates online. For example, currency exchange websites like OANDA, XE.com, or Bloomberg can be useful.

How do I document the exchange rate I used for my tax return?

It's useful to document the exchange rate you use for your tax return. You don't need to submit this documentation with your filing, but you should have it available if the IRS requests it.

Include the following:

• The exchange rate you used
• The source, such as the IRS table, your bank, or a financial website
• The date
• A copy or screenshot of the rate from that source

For example, if you used the IRS yearly average for EUR, save a copy of the IRS exchange rate table. If you used a spot rate from your bank for a property sale, keep a screenshot or a printout showing that rate.

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As an American citizen or resident, you'll need to convert any income you make in a foreign country to file your US tax returns.

You can use the IRS's yearly average rates for the income you earn throughout the year and spot rates for one-time transactions, such as a property sale.

After you file your taxes, you still need to move money across borders, either to pay what you owe or to receive your refund. Unfortunately, banks often charge high fees for international transfers and add markups to exchange rates.

With Wise, you can pay US taxes from abroad or receive refunds into your Wise USD account with the mid-market exchange rates and transparent fees.

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Sources

1. IRS - Yearly average currency exchange rates
2. IRS - Report of Foreign Bank and Financial Accounts (FBAR)
3. IRS - Summary of FATCA reporting for U.S. taxpayers
4. Financial Crimes Enforcement Network (FinCEN) - Reporting Maximum Account Value

Sources checked 11/13/2025