Converting Euros to US Dollars: A Guide for US Taxpayers

For U.S. tax purposes, it’s essential to report all figures in United States dollars. This means if you’ve received income or paid expenses in a foreign currency like the euro, you’ll need to convert those amounts into USD. Generally, the exchange rate you should use is the prevailing market rate, also known as the spot rate, at the time you received the income, paid the expense, or when the transaction accrued.

There’s a specific exception for certain Qualified Business Units (QBUs). These units, in most cases, are permitted to use the currency of a foreign country for their financial record-keeping. If you operate a QBU with a functional currency other than the U.S. dollar, you should determine your income in that functional currency first. Then, when necessary, translate that income or loss into U.S. dollars using the appropriate exchange rate.

It’s also important to be aware that you might need to recognize a foreign currency gain or loss on some foreign currency transactions. For detailed information on this, refer to section 988 of the Internal Revenue Code and related regulations.

Important Note: Remember that all payments for U.S. taxes must be made to the IRS in U.S. dollars.

Understanding Currency Exchange Rates

It’s worth noting that the Internal Revenue Service (IRS) does not have an official exchange rate. Instead, the IRS generally accepts any publicly available exchange rate that is applied consistently.

If you are dealing with a foreign country’s currency that has multiple exchange rates, it’s crucial to use the rate that is most applicable to your specific situation and the nature of your transaction.

Important: The exchange rates provided on this page are not for paying U.S. taxes to the IRS. When the IRS receives tax payments in a foreign currency (which is generally not recommended), the exchange rate they use to convert it to U.S. dollars is based on the date their bank converts the currency, not the date the IRS initially received the payment.

Utilizing Yearly Average Currency Exchange Rates

For exchange rates not listed in the table below, you can consult governmental and external resources, many of which are listed on the IRS “Foreign currency and currency exchange rates” page. You can also use any other reliable posted exchange rate, as long as you apply it consistently.

To convert an amount from a foreign currency, such as the euro, to U.S. dollars using the table below, simply divide the foreign currency amount by the yearly average exchange rate provided. Conversely, to convert from U.S. dollars to a foreign currency using these rates, multiply the U.S. dollar amount by the applicable yearly average exchange rate.

Yearly Average Exchange Rates for Converting Foreign Currencies into U.S. Dollars