The child tax credit for Americans abroad is worth up to $2,200 per child on a 2025 return, but the refundable part is closed to anyone who files Form 2555. Excluding your salary leaves no tax for the credit to reduce — and no refund either. US expat tax returns often turn on that one choice.
Families in Britain routinely lose several thousand dollars a year to it without ever seeing the alternative modelled. The credit itself is not restricted by living abroad. The relief you use to cancel your US tax is what shuts the door.
How the child tax credit works when you live abroad
The rules are the same wherever you live. The child must be under 17 at the end of the year, be your dependent, and — critically — hold a Social Security number valid for employment, issued by the due date of the return including extensions. The full credit is available up to $200,000 of income, or $400,000 on a joint return.
Up to $1,700 per child is refundable as the additional child tax credit, which is the part that produces a payment rather than just cancelling tax. The IRS sets out the conditions on its child tax credit page.
The SSN requirement catches families whose children were born abroad. A child with only a UK passport and no SSN does not qualify for the credit, so registering the birth with the consulate and applying for the number is a tax decision as much as an administrative one.
The Form 2555 bar
The instructions to Schedule 8812 are unambiguous: if you file Form 2555, you cannot claim the additional child tax credit. The foreign earned income exclusion removes the income, and with it the basis for a refundable credit.
The non-refundable part is not formally barred, but it is usually worthless in practice. Having excluded your salary, you have little or no US tax left for a credit to offset, so the credit expires unused. You are not penalised — you simply have nothing to apply it against.
The foreign tax credit does not have that problem
Claim the foreign tax credit instead and the income stays on the return. UK tax then cancels the US tax on it, and because you have not excluded anything, the additional child tax credit can still be refundable.
For a family in Britain this is often the better outcome, because UK tax rates on employment income generally exceed US rates, so the credit wipes out the US liability anyway. The choice is set out in FEIE versus the foreign tax credit, and the mechanics in Form 1116 explained.
| Form 2555 exclusion | Form 1116 credit | |
|---|---|---|
| Salary on the return | Excluded | Included, then offset by UK tax |
| US tax on the salary | Usually nil | Usually nil after credit |
| Additional child tax credit | Not available | Available if you qualify |
| Excess relief | Nothing carries forward | Unused credit carries forward 10 years |
| Works best where | Foreign tax is low or nil | Foreign tax is higher than US tax |
| Switching back | Revoking locks you out for 5 years | No equivalent lock-in |
Where the exclusion still wins
Low-tax and no-tax countries change the answer. An American in Dubai has no foreign income tax to credit, so the exclusion is the only relief available, and the refundable credit is genuinely lost rather than traded away.
The same applies to anyone whose UK tax is unusually low — large pension contributions, a part-year of work, or income mostly below the higher-rate threshold. Where the exclusion is doing real work, keep it, and treat the lost refund as its cost. Our guide to Form 2555 covers when it fits.
Before you switch
Revoking the exclusion is not a free decision. Once revoked, you generally cannot claim it again for five tax years without IRS consent, so the switch should be modelled over several years rather than one.
- Run both methods for the same year, including the refundable credit, before choosing.
- Check each child has an SSN valid for employment issued by the return's due date.
- Confirm you have at least $2,500 of earned income, which the refundable credit requires.
- Watch the $200,000 and $400,000 phase-out points, computed on income after the exclusion is added back where it applies.
- Remember self-employment tax survives both routes — neither relief touches it.
- Consider the five-year lock before revoking, especially if a move to a low-tax country is possible.
There is a deadline on looking backwards. A refund claim must generally be made within three years of filing the return or two years of paying the tax, whichever is later, so an unclaimed credit from four or five years ago is usually gone for good. Families who have been filing with the exclusion since their children were born often find two or three years still open and the rest closed.
If the numbers favour the credit, the change can often be made on an amended return for open years, recovering refunds that were never claimed. Tranzesta models both routes for the whole family before filing. Book a consultation to see which way your return falls. The wider position is covered under the foreign tax credit and double taxation.
Frequently Asked Questions
Can Americans abroad claim the child tax credit?
Yes. There is no residence requirement for the credit itself, worth up to $2,200 per qualifying child on a 2025 return. The obstacle is the relief you use: filing Form 2555 to exclude foreign earned income bars the refundable additional child tax credit and usually leaves no US tax for the non-refundable part to offset.
Why can't I claim the refund if I file Form 2555?
Because the instructions to Schedule 8812 state that if you file Form 2555 you cannot claim the additional child tax credit. The exclusion removes the earned income from your return, and the refundable credit is calculated from earned income, so there is nothing left to support a refund.
Does my child need a Social Security number?
Yes. Each qualifying child must have a Social Security number valid for employment in the United States, issued before the due date of your return including extensions. A child born abroad with no SSN does not qualify, so the birth should be registered with the consulate and the number applied for as early as possible.
Is the foreign tax credit always better for families?
Not always. It is usually better where foreign tax on your income exceeds the US tax, as it commonly does in the United Kingdom, because the US tax is cancelled and the refundable child credit stays available. Where foreign tax is low or nil, as in the UAE, the exclusion is normally the only effective relief.
Can I switch from the exclusion to the credit?
Yes, but with care. Revoking the foreign earned income exclusion generally prevents you from claiming it again for five tax years without IRS consent. For open tax years the switch can often be made on an amended return, which can recover child tax credit refunds that were never claimed.
Do I still owe self-employment tax if I claim the credit?
Yes. Neither the exclusion nor the foreign tax credit reduces self-employment tax, which is a separate charge on net self-employment earnings. Relief comes only through a totalization agreement, where a certificate of coverage from the other country's system exempts you from the US charge.
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