Can I claim the child tax credit as a U.S. citizen living abroad?

Looking for information about the refundable child tax credit from the American Rescue Plan Act? Head on over to our Coronavirus tax impact page for expats.

Working outside the U.S. can add a twist to how you file your taxes. As a U.S. citizen living abroad, you can claim the child tax credit, but there are some important differences from how you would file in the U.S.

Normally, you could claim both the nonrefundable and refundable portions of the child tax credit. However, while living abroad, your eligibility can differ:

• You’re not able to claim the refundable portion if you also claim the foreign earned income exclusion. This means the child tax credit by itself will not lead to a refund on your return.
  
  However, If the foreign income exclusion is not claimed, and for instance, you claim the foreign tax credit instead, then the child tax credit may still lead to a refund. The refundable portion of the credit increases from $1,000 to $1,400 until 2025.
  
• You can still use the nonrefundable portion of the child tax credit a U.S. citizen living abroad to lower the tax you owe on your U.S. federal return.

The rules around the child tax credit afford you the ability to claim up to a $2,000 credit per qualifying child on your tax return.

Depending on your overall situation, either the foreign tax credit or foreign earned income exclusion may be a better option for you. Our knowledgeable tax advisors can guide you to the best path for you.

Additional child tax credit considerations for U.S. citizens living abroad

Under the 2017 Tax Cuts and Jobs Act (TCJA), taxpayers can’t claim a child tax credit for a child who does not have a Social Security Number (SSN) by the due date of the return.

The TCJA does, however, allow a new type of credit—a $500 nonrefundable credit for dependents who do not qualify for the child tax credit. Taxpayers can claim this credit for children who are too old for the child tax credit, as well as for non-child dependents. There is no SSN requirement to claim this credit, so taxpayers can claim the credit for children with an Individual Tax Identification Number (ITIN) or an Adoption Tax Identification Number (ATIN) if they otherwise qualify.

What about the child care/dependent tax credit requirements?

Yes, expats are also able to claim this credit for a qualifying child or dependent. The normal child care tax credit requirements apply even if you’re abroad. You might qualify for a credit for the child care expenses paid to a foreign care provider so that you (and your spouse) can work or look for work.

However, eligibility rules for the child care tax credit state that you must have earned income on your U.S. tax return. Specifically:

• If you were able to reduce all your taxable income using the foreign earned income exclusion, then you cannot claim the child care credit.
• If you were not able to reduce all your taxable income using the foreign earned income exclusion, you can claim the child care tax credit on your U.S. expat tax return.

Additionally, you’re not obligated to provide a tax identification number for a foreign childcare provider like you are when living in the U.S.

Get Help with Claiming the Child Tax Credit and Child Care Tax Credit

Have more questions about these two credits? Ready to file? No matter how complicated your U.S. tax return is, there’s an expat tax expert ready to help. Get started with Virtual Expat Tax Preparation from H&R Block.

• If you were not able to reduce all your taxable income using the foreign earned income exclusion, you can claim the child care tax credit on your U.S. expat tax return.

Additionally, you’re not obligated to provide a tax identification number for a foreign childcare provider like you are when living in the U.S.