The child tax credit is a great benefit provided by the US government to American families with children under the age of 17. The credit or “tax refund” can be worth up to $1,000 per child, even if you did not pay any US taxes in that particular year. Most households with moderate income can qualify for this benefit. However, one must file a tax return in order to claim the refund.
The basic example illustrating the child tax credit is as follows:
Family with 2 small children
One parent (US person) earns income of $20K
Other parent (non-US person) earns income of $25K – not
reported on US tax return
US parent files tax return – reporting $20K in income
Families that qualify for the child tax credit can back file up to 3 years – the refund amount can be considerable.
Effective 2015 tax year, the rules have changed with respect to the child tax credit, when the foreign earned income exclusion (FEIE) is exercised. The presence of the FEIE on a tax return
invalidates the refundable child tax credit. A potential workaround is to file separate returns (when both parents are US persons), with the lower-earning parent reporting the children on his/her return. While this approach is slightly more complicated, it preserves the child tax credit in many instances.
One final point: To claim the child tax credit, one needs to have a social security number for each child. Obtaining a social security number in the US is the easiest option, and can often be
done within a day or two.
For more information on the child tax credit and other taxrelated issues, visit us at: holaexpat.com.
Disclaimer: The answers provided in this article are for general information, and should not be construed as personal tax advice.
Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved.
This article was written by John Ohe – IRS Enrolled Agent and CFA. John is a partner at Hola Expat, a firm that specializes in tax services for US expats. If you would like to submit a question, email: firstname.lastname@example.org.