Everything That You Must Know About Child Tax Credit
Are you aware of the child tax credit? Do you wish to know everything about child tax credits, and what are the different perks of child tax credits available to you when staying abroad? Let us know in more detail about it in this article about child tax credit!
What Is the Child Tax Credit?
The Child tax credit permits parents to deduct a specific amount from their US tax bill for each eligible child they have. It is generally $2000 for every kid. For instance, if a couple has two kids that are eligible for the child tax credit, they may decrease their US tax obligation by $4,000.
The child tax credit is refundable too. Even if you don’t have to pay any taxes, you may get up to $1,400 every kid as a tax refund. It means that if a couple owes no taxes to pay and has two kids that are eligible for the child tax credit, then they may be eligible for a tax refund of $2800.
So, how will you know that your kid is eligible for the tax credit? In many cases, they should:
- Have a valid SSN or social security number
- Be a citizen of the United States of America
- Stay with the parent claiming the credit for at least half of that particular year
- Be 16 years or even young at the tax year end in question
These are a few things for the year for the child tax credit. But what is going to change this year?
How Is the 2022 Child Tax Credit Different From Other Years? In March 2021, President Biden signed the ARP or American Rescue Plan, which is a $1.9 trillion stimulus package that is well-designed to assist ease the economic tensions of the COVID-19 outbreak. It is one of the methods by which the ARP does this is by making some temporary amendments to the Child tax. The changes are:
- Increasing the CTC or child tax credit amount to $3600 for every eligible kid who is 0-6 years old and $3000 for every kid between 7-17 years old.
- Making the child tax credit completely rather than partially-refundable
- Permitting parents to get up to half of their Child tax credit in advance via six months payments from July 2022 to December 2022.
As you may check, there are a few changes involved. Also, while several American families might be eligible for the complete advantages of the 2022 child tax credit, not everyone will. For instance, if your MAGI or modified adjusted gross income is higher than:
- $75000 when filing as single
- When filing as a head-of-household, it is $112,500
- When filing jointly as a surviving spouse or married couple, it is $15000
Then the major amount that you may claim might be decreased. Even if your modified adjusted gross income is above the threshold for the child tax credit in 2022, then you might still be eligible for the standard amount of $2,000 for every eligible kid.
Is It Possible To Claim the Child Tax Credit While Staying Abroad?
American expats who stay abroad are able to claim the CTC or credit tax credit and even the 2022 upgrades. Few of the caveats might apply. All expats might claim the standard Child Tax Credit for their eligible kids. Also, to get the advantages that the ARP or American Rescue Plan adds to the 2022 Child tax credit, you should have stayed in America for at least half of the year.
It means that unless your primary residence was in the United States in 2022 for six months, you might not become eligible for the advanced monthly payments or increased credit amounts. Also, any credit you may claim might only be partially refundable.
Is It Possible To Claim the Child Tax Credit if Your Kid Stays Abroad?
We are aware that American parents who stay abroad might become eligible for at least Child tax credit. But what if your kids are staying abroad instead of you? So, your kid must become eligible to claim the child credit tax. Among other things, it needs that:
- They offer less than half of their own support
- They stayed with you for more than half of the year
- They are a close relative like daughter, son, stepchild, grandchild, foster kid, niece, sibling, or even nephew
If this is true for your kid staying abroad, you might be able to claim a Child tax credit on their behalf. Also, it might not be a solution for you.
Is It Possible For US Expats To Claim the Foreign Earned Income Exclusion?
Several expats use FEIE or foreign earned income exclusion when filing income taxes in the United States of America. FEIE allows Americans staying abroad to exclude their foreign-earned income up to a threshold. For 2022, the threshold is $108,700.
But if you use the foreign-earned income exclusion, you might not be able to claim the refund portion of the child tax credit. If you have kids that become eligible for the child tax credit, you must use the foreign tax credit instead of theFEIE or foreign earned income exclusion. In a few scenarios, it might help you to erase your tax obligations while still getting the child tax credit as a refund. Also, if you are not unaware of what works best for you, then you must speak to a USTAXFiling expert.
Do You Have Doubts About the Child Tax Credit for Expats?
In this article, we have guided you to get a better knowledge of the child tax credits for expats. It might be a difficult thing for you. If you have any doubts regarding child tax credit or anything else related to income taxes for people staying abroad, then USTAXFiling.in would be happy to answer them.
At USTAXFiling.in expat tax services, we have rich experience in assisting people in filing their income taxes on time and properly. Our USTAXFiling.in experts are there to resolve all your doubts in the best possible way. Also, you may get in touch with USTAXFiling expats for more details and discuss everything you want, and they will be there to optimize your income tax strategy, so you only pay what you owe and not at all more. So, get started on your expat US taxes with USTAXFiling.in