How are foreign currency exchange gains taxed in Pennsylvania?

by James G. McGrory, CPA, and Stephanie K. Otake, CPA | Aug 29, 2019
askacpaicon


How are foreign currency exchange gains taxed in Pennsylvania? Is it the same as a capital gains or some other way? 

Unlike federal individual income tax rules, Pennsylvania does not have a capital gains tax provision or special tax rate for individuals. Pennsylvania taxes individuals at a flat 3.07% rate on all categories of reportable income, including gains or losses from the sale, exchange, or disposition of property.

Internal Revenue Code Section 988 outlines the federal income tax treatment for foreign currency exchange gains and losses realized from trading activities. For Pennsylvania individual income tax purposes, gains and losses from foreign currency exchange trading are treated as gains or losses from the sale, exchange, or disposition of property, and it is reported on Form PA-40, Schedule D.  

It is important to distinguish the differences between federal and Pennsylvania treatment for various sale transactions. For a more in-depth tax analysis, reach out to your CPA.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: James G. McGrory, CPA, and Stephanie K. Otake, CPA, are with Drucker & Scaccetti in Philadelphia.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Ask a CPA

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search