Interest in foreign bank -- taxable?

Question

I (a green card holder) have a joint account with my parents (non US citizen/non resident) in a foreign country (who does not tax interest income). My parents have put money into the bank (but not me). I would like to know is the interest taxable? If so, how to determine the exchange rate? Also, is being a joint account have an effect on the amount of interest I paid (e.g. with a joint account with my parents, will I consider my portion of interest incoming being 1/3 of the total)? Thanks.

Answer 1

Generally not taxable in the US if you are not a US citizen. However, you MUST file a declaration annually with the IRS declaring your foreign bank accounts in your name.

--A Damn Fine Tax Advisor

Answer 2

Since you are a US resident, your world-wide income is subject to US taxation. That interest is fully taxable. Since you are a joint owner you have the legal right to remove all of the funds at any time and therefore must report all interest credited to the account.

If the joint account holders were subject to US taxes you could split the interest but since they are not subject to US taxes you must claim the interest in its entirety.

The foreign account notification mentioned by another poster is a separate but related issue.

You can either use the exchange rates in effect on the date that the interest is credited to the account or the IRS maintains an list of average exchange rates for each tax year that you can use.

If they change your name on the account from joint owner to "payable on death" you will no longer have to pay tax on the income until all other joint owners die.

Answer 3

Basically if you are a US resident, anything kind of income in your name is taxable. However, you are only required to report your interest income when it is over a certain dollar amount ($1,500 or so). If the interest income is less than the required amount, you are not required to report it.