Form 8938 and Foreign Trust Assets

For a U.S. citizen, Form 8938 is the IRS form for reporting specified foreign financial assets when the applicable filing threshold is met. The rules cover which assets count, how filing status and residence affect thresholds, and how certain foreign trust assets are treated.

What Form 8938 covers

Form 8938 reports specified foreign financial assets in which a specified individual has an interest when their total value exceeds the applicable threshold. The instructions list foreign financial accounts and certain investments held outside a financial account among the covered assets.^[1]

An interest in a foreign trust can count when held for investment outside a financial account. The instructions also state that a trust interest is not a specified foreign financial asset unless the person knows, or has reason to know from readily accessible information, about the interest. A distribution from the trust means the person is considered to know of it.^[1]

The instructions define an interest by reference to amounts that are, or would be, reflected on an income tax return from holding or disposing of the asset. This can apply even when no such amount appears on the return for that tax year.^[1]

The form records the maximum value during the tax year of each specified foreign financial asset being reported. To determine whether the aggregate threshold is met, the instructions use the value on the final day of the tax year or the value at any time during that year, depending on the threshold test.^[1]

Filing and reporting thresholds

Form 8938 is attached to the annual income tax return, and a person who does not have to file an income tax return for the tax year does not have to file Form 8938. For an individual, the applicable threshold depends on marital status, whether a joint return is filed, and residence.^[1]^[2]

Individual reporting thresholds stated in the instructions
Residence and filing status	Last day of tax year	At any time during tax year
U.S. resident, unmarried or married filing separately	More than $50,000	More than $75,000^[1]
U.S. resident, married filing jointly	More than $100,000	More than $150,000^[1]
Qualifying taxpayer living abroad, unmarried or married filing separately	More than $200,000	More than $300,000^[1]
Qualifying taxpayer living abroad, married filing jointly	More than $400,000	More than $600,000^[1]

The abroad thresholds apply when the taxpayer's tax home is in a foreign country and the taxpayer meets one of the presence abroad tests described in the instructions. For an individual, the value of assets reported on certain other forms still counts when determining whether the filing threshold is met.^[1]

Assets reported on other forms

The instructions provide an exception from reporting an asset again on Form 8938 when it is reported on a listed form timely filed with the IRS for the same tax year. Listed forms include Form 3520 for specified trust reporting, Form 5471 for certain foreign corporation reporting, and Form 8621 for a passive foreign investment company or qualified electing fund.^[1]

For an individual, the value of assets reported on Forms 3520, 3520-A, 5471, 8621, and 8865 is still included when determining whether the filing threshold is met. Form 8938 identifies the other forms and the number filed. The instructions therefore distinguish threshold calculation from repeating asset details on the form.^[1]

Foreign trust owner exception

A person treated as the owner of part of a foreign trust under the grantor trust rules may leave out the specified foreign financial assets held by that owned portion if the stated filing conditions are met. The instructions require a timely Form 3520 for the same tax year, timely filing of Form 3520-A by the trust or a timely substitute filed by the owner, and reporting those Form 3520 and Form 3520-A filings on Form 8938.^[1]

This exception concerns the assets held by the portion treated as owned. It does not change the threshold calculation rule for individuals: the instructions say the value of assets reported on listed forms remains part of the threshold computation.^[1]

Questions and answers

Does Form 8938 accompany an annual tax return?

Yes. Form 8938 is attached to the taxpayer's annual tax return. A taxpayer who does not have to file an income tax return for the tax year does not have to file Form 8938, regardless of asset value.^[2]

Can an interest in a foreign trust be a specified foreign financial asset?

Yes, an interest in a foreign trust may be a specified foreign financial asset when held for investment outside a financial account. The instructions also tie recognition of the interest to knowledge or reason to know from readily accessible information.^[1]

How do the thresholds differ for a joint return?

For taxpayers living in the United States, a married couple filing jointly has thresholds above $100,000 on the last day of the tax year or above $150,000 at any time. For qualifying taxpayers living abroad, the corresponding amounts are above $400,000 and above $600,000.^[1]

What residence rule applies to the higher abroad thresholds?

The instructions describe these thresholds for a taxpayer whose tax home is in a foreign country and who meets one of the stated presence abroad tests. The thresholds also vary by marital status and joint or separate filing.^[1]

Does reporting assets on another form remove their value from the threshold calculation?

No. For a specified individual, the value of assets reported on Forms 3520, 3520-A, 5471, 8621, and 8865 is included when determining whether the threshold is met. The listed asset may qualify for an exception from being reported a second time on Form 8938.^[1]

When can an owner leave out assets held by part of a foreign trust?

A person treated as owner of part of a foreign trust may leave out assets held by that portion if the Form 3520 and Form 3520-A conditions are met. The filings must be timely for the same tax year, and the filings must be identified on Form 8938.^[1]

Related glossary terms

Reporting threshold for Form 8938: The Form 8938 instructions set asset value thresholds for specified individuals based on marital status, filing status, and qualifying residence abroad.
U.S. owner of a foreign trust: The Form 3520 instructions define a U.S. owner as a person treated as owning trust assets under grantor trust rules. Ownership can apply to part of a trust.
Financial interest in an account: FBAR rules define financial interest through account ownership or relationships to the legal title holder. A U.S. person who is the owner of record or holder of legal title of an account has a financial interest in it, even when the account is held for someone else's benefit.