Hey US expats with kids, here’s some important tax info you shouldn’t overlook: if you’re using the Foreign Earned Income Exclusion (FEIE) to avoid US taxes, you might be missing out on the Additional Child Tax Credit (ACTC), which could give you up to $1,700 per qualifying child in 2024.
For US expats raising children abroad, navigating your tax obligations can feel overwhelmingly complex. You work hard to provide for your family, but understanding how U.S. tax rules apply when living overseas can lead to confusion and the fear of missing out on valuable benefits.
What is the Additional Child Tax Credit (ACTC)?
The ACTC is a refundable tax credit for parents who qualify for the Child Tax Credit but can’t claim all of it. In 2024, the CTC offers up to $2,000 per child, with $1,700 potentially refundable through the ACTC.
Determining your eligibility for the ACTC
To qualify for the Additional Child Tax Credit, you generally must meet specific criteria:
- Earned Income: You need at least $2,500.
- Child: Must be under 17, a US citizen, national, or resident alien with a valid SSN before you file.
- Income Limits: Single under $200,000, or married filing jointly under $400,000.
- FEIE Catch: Claiming the FEIE makes you ineligible for the ACTC.
FEIE vs. ACTC – The trade-off
The FEIE lets you exclude up to $126,500 of your foreign earnings from U.S. taxes for 2024, but it disqualifies you from receiving the ACTC.
Consider the foreign tax credit (FTC)
If you’re in a high-tax country, the FTC might be more advantageous. It allows you to offset US tax with what you’ve paid abroad, keeping you eligible for the ACTC.
Amending past returns for missed credits
If you’ve claimed the FEIE in past years and missed out on the ACTC, you can amend returns for up to three years. By opting for the FTC instead of the FEIE, you might recover those credits. Feel free to contact us at contact@americantaxfilings.com for guidance.
Key points to remember:
- FEIE = No ACTC
- ACTC = Up to $1,700 Per Child
- FTC Could Be a Better Choice
- Amend Past Returns for Refunds
For detailed guidance, check out the IRS resources on the Child Tax Credit and ACTC. Don’t miss out on potential tax benefits for your family.
What you need to know about CTC, ACTC and ODC | Earned Income Tax Credit
