Child Tax Credit for Americans Living Abroad

Written by: Josh Katz, CPA

The Child Tax Credit (CTC) is a tax credit available to tax filers with dependent children under 17 years old.  The purpose of the credit is to provide financial assistance to families with children and to help reduce the tax liability of those families.

The credit is worth up to $2,000 per child, subject to certain income thresholds. The credit is partially refundable, which means that if a tax filer doesn’t owe any taxes, they may be eligible to receive a portion of the credit as a refund on their US tax return up to $1,500 per child for the 2022 tax year.

To be eligible for the credit, a child must meet the following criteria:

Age: The child must be under 17 at the end of the tax year.

Relationship: The child must be a son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or descendant of any of these individuals.

: The tax filer must have provided more than half of the child’s support during the year, and the child must have lived with the tax filer for more than half of the tax year.

Citizenship: The child must be a US citizen, US national, or US resident alien.

Social Security Number: The child must obtain an SSN before the deadline of the tax year where the credit is being claimed, extensions included.

Child Playing Clay

In addition to the child-related requirements, the tax filer must also meet certain income thresholds to qualify for the Child Tax Credit.

The tax filer’s taxable income must be less than $200,000 ($400,000 if filing jointly) to be eligible for the full $2,000 credit.  The credit is reduced by $50 for every $1,000 income excess on those thresholds.

Can US expats claim CTC?

Yes, US expats, or US citizens living abroad, may be eligible to receive the Child Tax Credit. However, it’s important to note that the CTC is subject to certain income limits, so it is essential to choose the correct approach to filing your US taxes.

US expats usually use the Foreign Earned Income Exclusion (FEIE) when filing their US taxes. FEIE is a tax benefit that allows US expats to exclude a certain amount of their foreign-earned income from US taxation. If you use FEIE to exclude your entire income, you cannot claim the child tax credit because you need taxable income to qualify. If you use FEIE and still have a portion of taxable income to report, you can claim the child tax credit but cannot claim the refundable amount.

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Need help with your US taxes?

The best approach to use is Foreign Tax Credit (FTC). US expats can use FTC to offset US taxes owed on foreign income, including income from foreign employment or self-employment. If a US expat has paid foreign taxes on their earned income, they may be able to claim a credit for those taxes and potentially lower their taxable income, making them eligible for the Child Tax Credit.

What if I missed a few years filing my US taxes? Can I still claim CTC for the years that I did not file?

If you need to catch up on your US taxes, you may still be able to claim the CTC for previous years if you meet the eligibility requirements.  Keep in mind that you can only claim a refund for up to three years from the original due date of the tax return, including any extensions.

Before claiming the credit, you must file your delinquent tax returns first. The best way to do that is by filing under the streamlined amnesty program, which allows you to get caught up by filing for the last three delinquent years and six years of FBARs without any penalties. You can file under the program and claim for CTC simultaneously.

If you need help catching up on your US taxes and claiming for the CTC, feel free to contact us at