You may be losing out on claiming $$$ of refundable Child Tax Credit because you are claiming the Foreign Earned Income Exclusion….
Bottom line – yes you could be! The nonrefundable and refundable portion of the Child Tax Credit can be treated differently. If you claim the Foreign Earned Income Exclusion, you will not be able to claim the refundable portion of the Child Tax Credit. However, the nonrefundable portion of the Child Tax Credit would still be available to lower tax you owe on your U.S. federal tax return.
Let’s recap to see if you are eligible to claim the Child Tax Credit:
· Credit amount. With effect from 2018, under new tax reform, the Child Tax Credit increased from $1,000 to $2,000. Eligibility for the credit did not change. As in past years, the credit applies if all of these apply:
· the child is younger than 17 at the end of the tax year, December 31, being filed
· the taxpayer claims the child as a dependent
· the child lives with the taxpayer for at least six months of the year
· the child must have a valid SSN at the time of the due date for filing
· Credit refunds. The credit is refundable, now up to $1,400. So if the taxpayer does not owe any tax before claiming the credit, they could receive up to $1,400 per eligible dependent as part of their refund.
· Earned income threshold. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
· Phaseout. The income threshold at which the child tax credit begins to phase out was increased to $200,000, or $400,000 if married filing jointly.
Dependents who can’t be claimed for the child tax credit, or who hold an ITIN, may still qualify for the credit for other dependents. This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of the tax year, and includes parents or other qualifying relatives supported by the taxpayer.
Still not sure? Use the expertise of the tax professionals at SmileTax to file your Expat Tax Return.