Conversion Euro to USD

You must convert foreign currency, including Euros, into US dollars when reporting amounts on your US tax return. This applies to both income received and expenses paid in a foreign currency. Generally, the prevailing exchange rate (spot rate) at the time of the transaction should be used for the conversion.

Qualified Business Units (QBUs) may have different rules. QBUs are often allowed to use the currency of a foreign country. If a QBU’s functional currency isn’t the US dollar, income is determined in that functional currency and then translated to USD using the appropriate exchange rate.

Foreign currency gains or losses may also need to be recognized on certain transactions. Section 988 of the Internal Revenue Code and its regulations provide guidance on this. US tax payments must be made in US dollars to the Internal Revenue Service (IRS).

The IRS doesn’t have an official exchange rate and generally accepts any consistently used posted rate. When dealing with countries that have multiple exchange rates, use the one relevant to your specific situation. The exchange rates published by the IRS are not used for converting tax payments made in foreign currency. The bank processing the payment determines the conversion rate based on the date they convert the funds, not the date the IRS receives them.

For currencies not included in the IRS published tables, consult governmental and external resources listed on the IRS website related to foreign currency and exchange rates or use any consistently applied posted exchange rate. To convert from a foreign currency to USD, divide the foreign currency amount by the applicable yearly average exchange rate. To convert from USD to a foreign currency, multiply the USD amount by the applicable yearly average exchange rate.

The provided yearly average exchange rates table allows for converting various foreign currencies, including the Euro, into US dollars for tax reporting purposes. This table offers historical data for several years, enabling accurate conversion based on the relevant tax year. Remember that these rates are for yearly averages and might not reflect the exact spot rate on a specific date. Using a consistent and documented exchange rate is crucial for accurate tax reporting.