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us expat tax guide – united kingdom

Can you receive an actual refund from the US Child Tax Credit in the UK?

Yes, you can. Many US expats are surprised to learn they may be eligible for the Child Tax Credit refund, even if they don’t owe US taxes. This can result in actual cash refunded to them, not just a reduction in taxes owed.

How does the Child Tax Credit work differently from a tax deduction?

The Child Tax Credit directly reduces your tax liability; if the credit exceeds your tax liability, the excess amount can be refunded. For example, if you’re eligible for a US$2,000 credit per child but your tax liability is only US$1,000, you could potentially receive the remaining US$1,000 as a refund.

Is the refund from the Child Tax Credit really money you can use?

Yes, if other tax credits or deductions reduce your US tax liability to zero, any remaining Child Tax Credit becomes a refundable amount that the IRS will pay. This means actual money can be deposited into your account, effectively putting cash in your pocket.

What criteria must a child meet to qualify for the Child Tax Credit?

To qualify for the Child Tax Credit, a child must:

  • Be under 17 at the end of the tax year.
  • Have lived with you for more than half of the tax year.
  • Be claimed as a dependent on your tax return.
  • Have a valid Social Security Number.
  • Be your child, stepchild, sibling, or a descendant of one of these (including adopted and foster children).

What if I’m self-employed?

Self-employed US expats can still claim the Child Tax Credit if they meet the eligibility criteria. However, they must contribute to their host country’s social security system or its equivalent to qualify.

How much can I claim through the Additional Child Tax Credit?

The maximum credit available per qualifying child is US$2,000, and up to US$1,600 is refundable on your 2023 tax return. For tax year 2024, the refundable portion is increased to $1,700.

How does the Additional Child Tax Credit work?

If your Child Tax Credit exceeds your tax liability, you might be eligible for the Additional Child Tax Credit. This allows you to receive a refund even if you owe no tax, utilizing the full benefit of the Child Tax Credit. This is especially helpful for families with lower tax liabilities due to other credits or deductions.

If your US tax due is $0, you will receive the entire refundable portion of the Additional Child Tax Credit, assuming you are eligible. 

It’s important to note that the refundable portion of the additional child tax credit will be US$1,700 for the 2024 tax year (tax returns filed in 2025).

What are the income requirements to claim the Additional Child Tax Credit refund?

To claim the refundable Child Tax Credit of US$1,700 per child for the 2024 tax year, you must have a minimum amount of Modified Adjusted Gross Income (MAGI)

US$2,500 is deducted from your MAGI and then we can consider 15% of the balance as your maximum claimable amount up to the refundable limit (US$1,700 per child in 2024).

Example with One Qualifying Child

If your 2024 MAGI is US$15,000 we then deduct US$2,500 leaving a balance of US$12,500.

15% of US$12,500 equals US$1,875.

In this example, you’d be able to claim US$1,700 on your 2024 tax return.

What If You Have Two Qualifying Children?

You could only claim US$1,875, not US$3,400 (US$1,700 x 2).

To claim the full US$3,400 let’s work the sum backwards.

If 15% of your MAGI = US$3,400 then 100% = US$22,667 and then we need to add the US$2,500 on top.

Your 2024 MAGI would need to be more than US$25,167 to claim US$3,400 for two qualifying children.

What’s the income cap to still receive the Child Tax Credit?

The phase-out begins at higher income levels. If you are a single filer, head of household, or married filing separately, the phase-out starts at an adjusted gross income (AGI) of US$200,000. For those married filing jointly, the phase-out begins at US$400,000. For every US$1,000 of income above these thresholds, the credit is reduced by US$50​.

What if I need to amend a previously filed tax return?

If you’ve already filed your taxes but now realize you qualify for the Child Tax Credit, you can file an amended return. We’ll assist you with the necessary paperwork to ensure you can claim any refunds you’re owed.

Can I amend my return if I used the Foreign Earned Income Exclusion?

Most likely. If you previously used the Foreign Earned Income Exclusion (Form 2555) and it impacted your ability to claim the Child Tax Credit, you can file an amended return. This allows you to adjust your filings accordingly to maximize potential refunds. Most people can file their last three years of tax returns depending on filing deadlines.

What’s involved in filing an amended or new tax return?

For amended returns:

  • Complete our detailed tax questionnaire.
  • Upload your previous year’s tax return.
  • Our IRS-licensed accountants will prepare your amended return for your review before submitting it to the IRS.

For new returns:

  • Complete the tax questionnaire.
  • Upload necessary documentation.
  • Our team will prepare your return and, after your review, submit it to the IRS.

Can the Child Tax Credit refund be claimed through the tax amnesty program?

Claiming the Child Tax Credit refund while participating in a tax amnesty program is often possible, depending on individual circumstances. We evaluate each case to determine eligibility, ensuring you can receive this refund as a direct payment.

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