top of page
  • Daniel Gray CPA Toronto

New US Tax Bill affect on child tax credit and USC abroad claims of refundable additional child tax

The child credit is designed to help working families offset some of the cost of raising children. Under the last law, the credit lets households reduce their taxes by up to $1,000 for each child under their care. The tax overhaul doubled that credit to $2,000.

The child must be under 17 years of age at Dec 31 of the tax year of the return filing, a taxpayer identification number (now only a SSN and not an ITIN after illegal immigrants bilked IRS out of 5 BILLION dollars claiming this refund using ITINs) can be used to claim said credit only if the TIN was issued on or before the due date of the return and child must be a US citizen.

The additional child tax credit (ACTC) kicks in as a refund check when a taxpayer's income is so low even after using the regular child credit - i.e., helps poor people. Strangely, by US tax law judging a taxpayer to be ‘poor’ or ‘rich’ by measure of tax owed and not forcing US citizens abroad (USCA) to first consider child tax credits before using foreign tax credits to rid themselves of all tax due (and thus be deemed poor), USCAs who typically do claim foreign tax credits reduce themselves for this purpose to being ‘poor on paper’ and eligible to receive the ACTC in spite of in reality being wealthy.

Until now, the credit began to phase out when adjusted gross income exceeds $75,000 for single parents or $110,000 for married couples and the dollar value of the credit rises with a household’s earnings. The new law doubles the potential full tax credit to $2,000 per child and raises the income threshold at which the credit phases out to $200,000 for single filers and $400,000 for married couples.

For families that earn too little to owe tax, the bill also made up to $1,400 of the credit refundable. With the expansion to the $200,000 - $400,000 income range, even more USCAs will be eligible to claim this refund on the basis of being ‘poor’ in claiming foreign tax credits to owe no tax before child tax credits and ACTC are considered (and with zero tax due and thus zero regular child tax credits used, no regular child tax credits are clawed backed against ACTC) and full bang on the buck will be achieved by claim of the maximum credit (unlike a resident US person with a decent salary whose regular child tax credits used will claw back and erase any claim to an ACTC refund).

This is also why the benefit of the child credit will be eroded for some resident US families by the tax bill’s elimination of personal exemptions but not so for USCAs.

60 views0 comments

Recent Posts

See All

Tax AI vs Tax Pro

I tested out IRS's new Form 1042-S Data Integrity Tool at This software program provides a no-cost standalone tool to assist in complying with

bottom of page