Larry Lain
Registered User
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- 9
This question might be slightly off-topic but it seems to fit here nonetheless. I'm bringing it up here because I had ignored idea of potential tax liability on currency exchange since I never ran into with regular bank accounts. Brokerage account create an issue.
I had been using Wise (formerly TransferWise) and Revolut for transferring money from USD to EUR in larger (for me) amounts.
I then found myself opening a USD-based IBKR account to get access to European stocks and discovered transferring USD to EUR thru IBKR cut the fees up to 90% versus Revolut or Wise. When I transferred some of this money the USD:Euro exchange rate was close to parity. It's now closer to 1.10 : 1.
It now seems that withdrawing this Euro cash from IBKR into a regular Euro bank account will create a tax event because IBKR is a brokerage account. There's a roughly 10% currency capital gain involved on which I am now taxable in the US. Had I paid the extra fee to use Wise or Revolut, it seems no taxable event would arise. In my situation it therefore appears that to save about $400 in fees on a 100k USD/Euro exchange, I've become liable for about $2,500 in capital gains in the US.
Of course, had the USD:Euro exchange rate gone the other direction, I'd be looking at a capital loss to reduce my capital gains liability.
I presume IBKR would create similar tax events for those transferring EUR, or Sterling, to USD for the purpose of buying US stocks on US exchanges, or when withdrawing USD for use in the USA by EU or UK residents.
Anyone here familiar with this situation?
I had been using Wise (formerly TransferWise) and Revolut for transferring money from USD to EUR in larger (for me) amounts.
I then found myself opening a USD-based IBKR account to get access to European stocks and discovered transferring USD to EUR thru IBKR cut the fees up to 90% versus Revolut or Wise. When I transferred some of this money the USD:Euro exchange rate was close to parity. It's now closer to 1.10 : 1.
It now seems that withdrawing this Euro cash from IBKR into a regular Euro bank account will create a tax event because IBKR is a brokerage account. There's a roughly 10% currency capital gain involved on which I am now taxable in the US. Had I paid the extra fee to use Wise or Revolut, it seems no taxable event would arise. In my situation it therefore appears that to save about $400 in fees on a 100k USD/Euro exchange, I've become liable for about $2,500 in capital gains in the US.
Of course, had the USD:Euro exchange rate gone the other direction, I'd be looking at a capital loss to reduce my capital gains liability.
I presume IBKR would create similar tax events for those transferring EUR, or Sterling, to USD for the purpose of buying US stocks on US exchanges, or when withdrawing USD for use in the USA by EU or UK residents.
Anyone here familiar with this situation?
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