Raising a US-citizen child overseas does not cost you the Child Tax Credit by itself. What quietly costs expat families the credit, or at least the cash-refundable part of it, is the most common tool in expat tax prep: the Foreign Earned Income Exclusion. Claiming the Child Tax Credit for US expats abroad is straightforward on paper, one qualifying child, one Social Security number, up to $2,200 on Schedule 8812, but the mechanics of Form 2555 can zero out the refundable portion before you ever see it, and almost nobody warns families about it until after the return is filed.
Can US Citizens Living Abroad Still Claim the Child Tax Credit?
Yes. The obligation to file a US return follows citizenship, not location, and the Child Tax Credit under IRC §24 is available to any taxpayer with a qualifying child, wherever that taxpayer lives. Nothing in the statute conditions the credit on US residency.
The friction is not eligibility, it is arithmetic. The credit has two pieces: a nonrefundable amount that can only offset actual US tax liability, and a refundable Additional Child Tax Credit (ACTC) computed on Schedule 8812 from your earned income. Both pieces depend on numbers that a typical expat return, one built around the Foreign Earned Income Exclusion, routinely drives to zero.
What Is the FEIE Trap for the Child Tax Credit?
The trap is that the tool expat families use to eliminate US tax on foreign wages is the same tool that can eliminate their Child Tax Credit. Form 2555 excludes foreign earned income from gross income under IRC §911, up to an annually indexed maximum ($130,000 for 2025). Exclude enough income and your taxable income, and often your US tax liability, falls to zero. With no tax liability, there is nothing left for the nonrefundable part of the credit to offset.
The refundable ACTC does not rescue the family in that scenario, because Schedule 8812 does not treat excluded income as earned income. The instructions are explicit that income excluded on Form 2555 is not entered as earned income for the additional credit computation. A family whose only income is fully excluded under §911 therefore shows $0 of countable earned income, which produces $0 of refundable credit regardless of how many qualifying children they have. The family can hold a valid, otherwise-unused $2,200-per-child credit and receive none of it in cash.
Why Does Excluding Income With Form 2555 Wipe Out the Refundable ACTC?
Because the ACTC formula is built entirely off earned income that actually shows up on the return, and excluded income by definition does not. The refundable credit is generally computed as 15% of earned income above a $2,500 floor, capped at the unused portion of the per-child credit (families with three or more qualifying children have an alternative computation using Social Security and Medicare taxes withheld, which is also driven off income that is on the return). Either path requires earned income the return actually reports.
Consider a married couple filing jointly with two qualifying children, both with Social Security numbers, and $85,000 of combined foreign wages, on which they paid $9,000 of foreign income tax.
Under the FEIE, the $85,000 disappears from taxable income and from Schedule 8812's earned income line at the same time. Both halves of the $4,400 credit (two children at $2,200 each) can go unused. Under the Foreign Tax Credit on Form 1116, the $85,000 stays in taxable income, the $9,000 of foreign tax paid offsets US tax on it subject to the IRC §904 limitation, and the earned income figure Schedule 8812 needs is still on the return. The family may still owe some residual US tax if the foreign rate is lower than the US rate on that income, but they now have a real shot at the refundable credit they had zeroed out under the exclusion.
Can Using the Foreign Tax Credit Instead of the FEIE Save the Refundable Credit?
Often, yes, and it is the central planning lever for expat parents. Choosing the Foreign Tax Credit over the FEIE, or forgoing the exclusion for part of the year's income while claiming FTC on the rest, keeps earned income visible to Schedule 8812 instead of scrubbing it out.
The right choice is not automatic and depends on where you live. In a high-tax country, the United Kingdom, most of Western Europe, or similar, the foreign tax paid is often large enough to offset most or all of the US tax the income would otherwise generate, so the FTC route can leave the family with little or no incremental US tax while preserving the ACTC. In a low-tax or no-tax jurisdiction, the United Arab Emirates or Singapore, for example, there may be little or no foreign tax to credit, so the FEIE still does more to reduce current US tax, and the family has to weigh that savings against the forfeited credit. The more qualifying children in the household, the more that balance tips toward preserving earned income, since each forfeited child is worth up to $2,200.
One structural point matters if you have claimed the FEIE in a prior year and want to switch: revoking the election is not costless. Under Treas. Reg. §1.911-7(b)(1), once you revoke a §911 election you generally cannot re-elect the exclusion for five years without IRS consent. That does not mean you are stuck, a family can still choose FTC for the current and future years, but the decision should be modeled for more than a single filing season before you revoke.
Does a Child Need a Social Security Number, or Does an ITIN Work?
A Social Security number, not just a taxpayer ID, and it must be issued by the due date of your return, including extensions. IRC §24(h)(7), added by the 2017 tax law, made an SSN a hard requirement for a child to be a qualifying child for the Child Tax Credit itself. A child who has only an Individual Taxpayer Identification Number does not meet that requirement and is not eligible for the Child Tax Credit or the refundable ACTC, no matter how well the child otherwise fits the qualifying child tests.
That does not mean an ITIN-only dependent gets nothing. IRC §24(h)(4) provides a separate $500 nonrefundable Credit for Other Dependents (ODC) for a dependent who does not have the SSN the CTC requires. The ODC is smaller and entirely nonrefundable, but it is real and often missed on expat returns where a child's SSN application is still pending. If your child does not yet have an SSN, applying is usually the higher-value move: the difference between the $500 ODC and the up-to-$2,200 CTC, times however many years the child is under 17, is significant.
A related wrinkle for expat families: if a spouse is a nonresident alien, filing status and elections around that spouse can affect the household's overall numbers and, in some households, whether it makes sense to make a joint filing election with a nonresident spouse. That decision interacts with both the FEIE and the Child Tax Credit and is worth reviewing together rather than in isolation.
What Are the Qualifying Child Tests for the Credit?
The Child Tax Credit borrows its qualifying child definition from IRC §152(c), the same test used for the dependency exemption, with the SSN requirement layered on top by §24(h)(7).
The Qualifying Child Tests
Reference- Age. Under age 17 at the end of the tax year.
- Relationship. Son, daughter, stepchild, foster child, sibling, step-sibling, or a descendant of any of these (grandchild, niece, nephew).
- Residency. Lived with you for more than half the year. A US-citizen child living abroad with the parent claiming the credit generally satisfies this test, since the test is about living with the taxpayer, not about living in the United States.
- Support. Did not provide more than half of their own financial support for the year.
- Citizenship. US citizen, US national, or US resident alien.
- Joint return. Cannot file a joint return for the year, other than to claim a refund of withheld tax.
- Identification. Has a Social Security number issued by the due date of your return, including extensions.
For most expat parents the substantive tests, age, relationship, support, citizenship, are not where returns get it wrong. The SSN requirement and the FEIE-versus-FTC election are.
How Much Is the Child Tax Credit Worth and Where Does It Phase Out?
For 2025, the credit is $2,200 per qualifying child, with the refundable Additional Child Tax Credit capped at up to $1,700 per child, a figure that is indexed and adjusts most years. The credit phases out for higher earners under IRC §24(b): it begins reducing at $200,000 of modified adjusted gross income for single, head of household, and married filing separately filers, and at $400,000 for married filing jointly, falling by $50 for every $1,000 (or part of $1,000) of income above the threshold.
The One Big Beautiful Bill Act, enacted in 2025, made the Child Tax Credit permanent (it had been scheduled to revert to $1,000 after 2025) and increased the base credit to $2,200 per qualifying child effective for 2025, with that amount indexed for inflation in later years. The exact current-year dollar figures for the base credit, the refundable cap, and the phase-out thresholds should always be confirmed against the current Schedule 8812 instructions before you file, since indexed amounts and any further legislative changes can move them from year to year.
Bottom Line
A qualifying child with a Social Security number does not automatically mean a family collects the Child Tax Credit in cash. Whether they do turns on whether their income and tax liability, not just their family composition, still show up on the return after their expat elections are made. Running the FEIE and the Foreign Tax Credit side by side, before you file, not after, is how you find out which one actually leaves more money in your pocket once the Child Tax Credit is factored in.
Have questions about the Child Tax Credit for US expats abroad? Contact TS CPA for a free consultation. We respond within the same day.
Official IRS and Government Sources
- IRS, Child Tax Credit
- IRS, Schedule 8812 Instructions (Credits for Qualifying Children and Other Dependents)
- IRS, About Form 2555, Foreign Earned Income
- IRS, Foreign Earned Income Exclusion
- IRS, About Form 1116, Foreign Tax Credit
- IRC Section 24, Child Tax Credit
- IRC Section 911, Citizens or Residents Living Abroad
- Treas. Reg. Section 1.911-7, Procedural rules (making and revoking the section 911 election)