The phrase "specified foreign financial asset" is the heart of Form 8938. Get it right and the rest of the form is mostly arithmetic. Broadly, there are two buckets: foreign financial accounts, and other foreign financial assets held for investment.
Bucket 1: Foreign financial accounts
These are financial accounts maintained by a foreign financial institution. The most common examples:
- Foreign bank accounts (checking, savings, term deposits)
- Foreign brokerage and securities accounts
- Foreign mutual funds and other pooled investment accounts
- Certain foreign insurance or annuity contracts with a cash surrender value
- Foreign pension and deferred compensation accounts (in most cases)
Bucket 2: Other foreign assets held for investment
This bucket is what makes Form 8938 broader than the FBAR. It reaches certain assets that are not held inside an account, as long as they're held for investment:
- Foreign stock or securities held directly — for example, shares issued by a foreign company that you hold in certificate form or registered in your own name, not through a brokerage account.
- Interests in a foreign entity — a stake in a foreign corporation, partnership, trust, or estate.
- Foreign-issued financial instruments or contracts that have a non-U.S. issuer or counterparty — notes, bonds, swaps, options, and similar instruments.
"Held for investment" is the pivot
The Bucket 2 assets only count if you hold them for investment. An asset used in an active trade or business is generally excluded from Bucket 2. Note the important asymmetry: assets in a foreign account (Bucket 1) are reportable regardless of whether they're held for investment or business.
What is NOT a specified foreign financial asset
Several things people assume are covered are actually excluded from Form 8938:
| Asset | Reportable on 8938? | Why |
|---|---|---|
| Directly held foreign real estate | No | Real property isn't a financial asset. (A foreign entity that holds the real estate can change this.) |
| Directly held tangible assets — art, jewelry, cars, gold bullion | No | Physical personal property isn't a financial asset. |
| Foreign currency held directly (physical cash) | No | Cash in hand isn't a financial account or security. |
| Assets held in an account at a U.S. financial institution | No | The account isn't "foreign," even if it holds foreign investments. |
| A financial account at a U.S. branch of a foreign bank | No | A U.S. branch is treated as a U.S. payor. |
| Assets held in a foreign branch of a U.S. bank | Generally no for 8938 | Not maintained by a foreign financial institution — but note the FBAR may still apply. |
The real-estate exception has an exception
Directly held foreign real estate is not reportable. But if you hold that real estate through a foreign entity — say, a foreign corporation or partnership that owns the property — then your interest in the entity is a specified foreign financial asset, and its value (which reflects the real estate) does count. Ownership structure changes the answer.
Where cryptocurrency stands
As of current IRS guidance, foreign-held cryptocurrency sits in an unsettled area. Crypto held in a foreign account at a foreign exchange can fall within Bucket 1. Crypto held in a self-custodied wallet with no associated foreign financial institution is harder to categorize, and the Treasury and IRS have signaled that rules in this area continue to evolve. Because this is a moving target, treat any general statement (including this one) as a starting point, not a conclusion, and confirm current guidance before relying on it.
Foreign pensions: usually in, but nuanced
Most foreign pension and deferred compensation arrangements are specified foreign financial assets and must be reported, using the value of your interest. Valuation can be genuinely difficult when a plan won't give you a lump-sum figure. We devote a whole article to it: Foreign Pensions and Form 8938.
Next steps
- Reporting Thresholds — once you know what counts, check whether the total crosses your threshold
- Valuing Foreign Assets — how to put dollar figures on each item
- How to File — where each asset type goes on the form