# Calculating the exchange rate for tax return



## deathbytax (May 3, 2014)

Hello, I was wondering if someone could enlighten me here.
This is the first year that I am doing my US taxes by myself (I honestly cannot afford the accountant anymore). I do understand that you have to express your foreign income into US dollars, however, I am a bit confused as to whether I am simply taking my CAD$ earnings and reducing them to reflect what they would equal in USD$ (given that USD is stronger than CAD) OR am I calculating the amount of what it would be had I earned it in actual USD$, which would mean that this actually increases my foreign income amount (again, even though the US$ is stronger than CAD)
This sounds confusing, but there is a big difference between the two.


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## Bevdeforges (Nov 16, 2007)

This is the table the IRS provides: Yearly Average Currency Exchange Rates

But they aren't real picky about which exchange rate you use, as long as it's "reasonable." Basically, any published exchange rate table should do.

Officially, you should use the exchange rate for the dates you actually received your pay, or when any other transaction took place. But even the IRS realizes that this isn't practical for individuals, so they usually publish an annual table of "average" exchange rates for the year.
Cheers,
Bev


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## Nononymous (Jul 12, 2011)

deathbytax said:


> Hello, I was wondering if someone could enlighten me here.
> This is the first year that I am doing my US taxes by myself (I honestly cannot afford the accountant anymore). I do understand that you have to express your foreign income into US dollars, however, I am a bit confused as to whether I am simply taking my CAD$ earnings and reducing them to reflect what they would equal in USD$ (given that USD is stronger than CAD) OR am I calculating the amount of what it would be had I earned it in actual USD$, which would mean that this actually increases my foreign income amount (again, even though the US$ is stronger than CAD)
> This sounds confusing, but there is a big difference between the two.


Take the amount you earned in CAD and convert to USD. (Which would reduce or increase the nominal amount depending on the current exchange rate - a few years back the CAD was worth more.) The second part of your question doesn't really make sense.


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## deathbytax (May 3, 2014)

Nononymous said:


> Take the amount you earned in CAD and convert to USD. (Which would reduce or increase the nominal amount depending on the current exchange rate - a few years back the CAD was worth more.) The second part of your question doesn't really make sense.


Your right. The second part of my question did not really make sense...did it?
That's what taxes does to me. Math is not my strong point (English major). Now that I am looking at things with a clear head, it's all good.
Thanks for your help.


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## Nononymous (Jul 12, 2011)

deathbytax said:


> Your right. The second part of my question did not really make sense...did it?
> That's what taxes does to me. Math is not my strong point (English major). Now that I am looking at things with a clear head, it's all good.
> Thanks for your help.


Actually it was the English that had me confused...


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## maz57 (Apr 17, 2012)

I thought I was pretty good with English until I started to read the instructions for various IRS forms!


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