Additional Child Tax Credit

The additional child tax credit is a refundable tax credit for as much as $1,000 per eligible child.

A taxpayer is eligible for the credit if they have a qualifying child/children and earned income as explained below:

 

Conditions for eligibility of your US child living abroad:

  1. Your child must have a US social security number.
  2. Your child must be age 16 or younger as of December 31st of the tax year at hand.

Important to note: If your child received citizenship via naturalization, (as opposed to receiving citizenship from birth), your child is only eligible for the tax credit beginning from the year of naturalization.

Income requirements:

  1. Income must be earned as an employee or from self-employment. (It is important to note that in case of audit, the IRS requires strict verification of earned income.)
  2. The amount of the credit is tied to the amount of your earned income. In general (except for high income individuals, see below), your eligibility for the credit increases as your earned income increases. Your credit is limited to 15% of amounts earned over $3,000. For example, if a taxpayer earns $13,000 annually, his total additional child tax credit will be $1,500, regardless of how many eligible children he has.
  3. For married taxpayers that earn over $110,000 annually there are additional limitations. The more you earn over $110,000, the less you can claim as a credit. The credit is reduced by 5% of your Adjusted Gross Income over the $110,000 threshold.

 

Important information to note:

  1. If taxes are due, the child tax credit will be used to offset taxes and will not be refunded.
  2. The refund is received only if a tax return is filed and can be received as a US treasury check, a direct deposit into your US bank account, or as a credit against your next year’s taxes.
  3. The income of your Non-Resident Alien spouse can be included if your spouse receives
    an Individual Tax Identification Number (ITIN).
  4. The refundable credit cannot be received if the earnings are excluded using the Foreign
    Earned Income Exclusion. If both spouses have earned income, it is possible to claim the Foreign Earned Income Exclusion on only one of the spouse’s earnings, thereby, making the other spouse’s earnings eligible for the additional child tax credit. (This spouse can additionally utilize the foreign tax credit to reduce US taxes due).
  5. Refunds can be claimed for up to three years from the original due date of the return.
  6. Other variables may reduce the Additional Child Tax Credit refund such as US sourced passive income, self-employment tax, and alternative minimum tax.