Which Exchange Rates to Use
Converting Canadian dollar amounts to US dollars can be a pain in the left heel. Whether you use online software, or complete fillable PDF forms, it has to be done. Here are a few pointers to make the process as carefree as possible:
- For most values on tax returns (see 3. for exceptions), use the average annual exchange rate. Although instructions require US Treasury’s published rates, historical rates can be hard to find. But the Bank of Canada published rates work well, and in my experience have never been rejected:
- For FBARs and forms 8938, use year-end rates. These are easily found on the Treasury website:
- For single instance transactions, such as stock purchases or sales, look up the rate on the actual transaction date. Once again, the Bank of Canada shines, with its 10-year daily currency converter:
How to Use Exchange Rates
Whether using an average annual rate, a year-end rate, or any other rate, be careful to notice if the rate converts US dollars to Canadian dollars, or vice versa!
Generally speaking, you want to convert from $Cdn to $US, so if an exchange rate shows as “$Cdn to $US”, simply MULTIPLY your $Cdn amounts to get the equivalent amount in $US.
If you only find rates that convert from $US to $Cdn, just divide 1.0 by the rate you DID get, and voila! You have a rate you can multiply your $Cdn amounts by to get $US.
For example, if you got a rate of 0.75 to convert US dollars to Canadian dollars, calculate 1.0/0.75 = 1.3333 to get the rate to convert Canadian to US.
Making It Even Easier
If you have experience with Microsoft Excel, it is fairly easy to convert your amounts to $US in a spreadsheet. Just enter a description of your item in column A, your $Cdn amount in column B, your conversion rate in column C, and your formula to multiply them in column D.
For example, if you are on row 2, enter the following formula in cell D2: “=B2+C2”. Finally, copy the exchange rate down column C, and this formula down column D, to as many rows as you need. Now, your $US dollar amounts automatically appear as you enter your $Cdn amounts in column B!
Download a sample workbook for 2016:
DISCLAIMER: This is an example workbook. Microsoft Excel ® is a known to transmit viruses, consequently, Excel disables workbook content when transmitted by the Internet, and displays an “Enable Content” button. While we do our best to ensure this example workbook is virus free, you acknowledge that you enable the content of this workbook at your own risk. US Tax Victoria is only able to recommend using this spreadsheet as an example. Instructions are provided on our site to construct your own workbook, which you will be able to use for years to come.
This workbook contains separate spreadsheets for converting to $US, each using one of the following types of rates:
- average annual rates (for most tax return entries),
- year end rates (mostly for FBAR or form 8938), and,
- specific transaction dates (capital gains calculations, etc.).