I Got Taxed for Moving My Own Money (Thanks, Currency Gods)

Ever wired money from your foreign bank account to your U.S. bank and thought, “Cool, now I can finally pay my CPA with this stack of euros I earned last year”?

Yeah. Well, surprise!

The IRS sees that as a potential taxable event, and next thing you know, you’re getting hit with a capital gains tax for doing what every immigrant, expat, international contractor, and backpacking digital nomad does every day:

💱 Moving. Your. Own. Money.

Let’s break it down before your Venmo balance breaks down.

🧠 But... Why Is This a "Gain"?

Because currency is a living, breathing, dramatic thing.

Let’s say you earned €10,000 from a freelancing gig in Paris last year when the exchange rate was 1 EUR = 1.00 USD. You didn’t touch the money—you just left it in your French account like a good croissant-loving squirrel.

But this year, you decide to transfer it back to your U.S. bank… and now the rate is 1 EUR = 1.10 USD.

Boom 💥 That €10,000 is now worth $11,000.

You didn’t work more. You didn’t invest. You didn’t even check your email.

But the IRS sees a $1,000 gain. And guess what? That gain is taxable. 😐

🧾 Welcome to the Land of Unintentional FX Capital Gains

Most people don’t realize this, but the Foreign Currency Conversion game comes with:

• Section 988 gains and losses,

• Capital gains tax rules on non-functional currency,

• And nightmares for anyone who just wanted to send grandma some CAD.

  
  

🧪 Real-Life Example (That Will Hurt Your Feelings)

Sofia, a digital marketer, worked in Berlin for two years. She saved €20,000 in her German bank account.

• When she earned it, 1 EUR = $1.05, so technically she made $21,000.

• She forgot about the account (Berlin has good beer).

• A year later, she transfers the €20K home—only now the rate is 1 EUR = $1.15.

Her U.S. bank receives $23,000.

💰 IRS math:$23,000 - $21,000 = $2,000 capital gain

🧾 IRS attitude: “Congrats! We’ll take our cut now.”

😱 This Happens to Way Too Many People, Including:

• Immigrants with bank accounts overseas

• Remote workers paid in local foreign currency

• Expats returning home with savings

• Cryptocurrency holders bouncing between currencies like it’s a trampoline park

• That uncle who worked in Dubai for five years and just wired his AED back to the States.

  
  

🧠 So What Do You Do?

1. Track your foreign income in USD on the date you received it.Use a site like OANDA to get the correct daily exchange rate. Seriously—don’t guess.

   
   

2. Document the “basis” (original USD value) of all foreign amounts.Even if you leave it sitting there for years.

   
   

3. Report the gains (or losses) when you bring it home.Yes, losses can offset gains. The IRS loves to tax your good fortune, but not your bad luck. Classic.

   
   

4. Work with a tax pro who doesn’t faint when you say “Vietnamese dong.”You’d be surprised how many don’t.

   
   

🧠 Tax Nerd Tip: Section 988 vs. Capital Gains

Some foreign exchange gains fall under Section 988 ordinary income rules. Others under capital gains rules. Depends on how the currency was used, and whether you're in biz.

Either way: if you made money just from currency moving, it's taxable.

🎤 Final Thoughts

It's already emotionally damaging to see how little your home country’s currency is worth abroad. But finding out that the IRS wants a cut of your currency rebound?

That’s trauma.

So next time you transfer money from abroad, don’t just check the exchange rate—check your tax situation too.

And if you're not sure what rate to use, OANDA it. They’ve got daily historical FX rates so precise it makes accountants weep tears of Excel joy.

🔗 Ready to track your transfers like a tax god?

Use the OANDA currency converter to avoid guesstimating your tax bill.And if the IRS shows up asking why you owe them $824.16 on your own euros…Well. Now you know.