Free Money From the IRS – Child Tax Credit

Guest post by John Ohe, IRS Enrolled Agent and chartered Financial Analyst.

John Ohe 1For many expat families with children under 17 years of age, it is possible to get a “refund” from the IRS without having paid any U.S. taxes. This wonderful subsidy is called the Child Tax Credit. Basically, it’s money that the U.S. government provides to middle income families to help with the cost of raising kids. The Child Tax Credit can be worth as much as $1,000 per child.

Let’s take a look at a couple of examples:

Nancy and John – Nancy works, and John is a stay-at-home dad

Nancy and John have 3 children, all under the age of 17. Nancy earns $30K per year. The family does not have any additional income. At this level, Nancy and John do not owe any income tax (because their income level falls below standard deduction and exemptions). However, they can expect a check (or direct deposit) from the IRS in the amount of $3,000 – assuming Nancy and John file their tax return.

Open up to new possibilities abroad.

Susan and David – Both Susan and David work

Susan and David also have 3 children, all under the age of 17. Susan earns $100K per year as a consultant. David works at a non-profit and earns $30K per year. With a combined income of $130K, this family is earning well above middle class income. The Child Tax Credit normally begins to phase out at $110K in income. However, many U.S. expats have the advantage of exercising the foreign earned income exclusion (FEIE).

Susan qualifies for the FEIE, and will basically wipe out all of her income on their tax return. David will purposely not exercise the FEIE, so that his income will qualify the family to receive the Child Tax Credit. Same as with Nancy and John, Susan and David can expect a check (or direct deposit) from the IRS in the amount of $3,000.

Can I get money back from past years?

Yes. However, there is a 3-year statute of limitation, after which one cannot claim a refund. Therefore, one has until April 15, 2015 to file a 2011 tax return (which was originally due on April 15, 2012).

Tax Deadline Reminder

April 15th – interest on any taxes owed begin accruing
June 15th – due date for filing without the risk of a late penalty
October 15th – due date if you filed an extension

Other articles by this Author

U.S. Expat Taxes – An Introduction

Buying and Selling Real Estate (Foreign or Domestic) from a Tax Perspective

If you would like to submit a tax-related question, please visit us:  HolaExpat.com .

All responses are provided by John Ohe (IRS Enrolled Agent and Chartered Financial Analyst).

Hola Expat helps Americans living abroad with their U.S. tax returns. Our professionals are IRS Enrolled Agents with expertise in expatriate tax return matters. Take a look at our fee schedule. We offer the most sensible pricing among our competitors.

Disclaimer: The answers provided in this article are for general information, and should not be construed as personal tax advice. Tax laws and regulations change frequently, and their application can vary widely based on the specific facts and circumstances involved.

About Retire Early Lifestyle

Billy and Akaisha Kaderli retired two decades ago at the age of 38 and began traveling the world. As recognized retirement experts and internationally published authors on topics of finance and world travel, they have been interviewed about retirement issues by The Wall Street Journal, Kiplinger's Personal Finance Magazine, The Motley Fool Rule Your Retirement newsletter, nationally syndicated radio talk shows and countless newspapers and TV shows nationally and worldwide. They wrote the popular books The Adventurer's Guide to Early Retirement and Your Retirement Dream IS Possible.
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