Additional Child Tax Credit
Published on November 05, 2025
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Additional Child Tax Credit: The refundable side of the CTC for expats
For many American expats, the Child Tax Credit (CTC) sounds familiar, but the Additional Child Tax Credit (ACTC) is where the real cash comes in. It’s the refundable part that can actually land money in your account, not just reduce your US tax bill.
Let’s unpack how this works in 2025, especially if you live overseas and want to claim every dollar you’re entitled to.
What is the Additional Child Tax Credit (ACTC) for 2025?
In 2025, eligible parents can claim up to US$1,700 per child as a refundable credit, meaning you can get a refund even if you owe no US tax.
To qualify for the refundable portion, your earned income must be at least US$2,500. The refund phases in at 15% of your income over that amount, capped at US$1,700 per child.
For example:
- Earned income: US$15,000
- Subtract the US$2,500 threshold: US$15,000 – US$2,500 = US$12,500
- Apply the 15% phase-in rate: US$12,500 × 15% = US$1,875
In other words, even though the math gives you US$1,875, the IRS limits the refundable portion to US$1,700 per qualifying child.
Bottom line: The non-refundable portion of the CTC (worth up to US$2,200 per child in 2025) reduces your tax bill but can’t trigger a refund. The ACTC, however, turns part of that into real money.
Why does the Additional Child Tax Credit work differently for expats?
The ACTC works differently for expats because the IRS bases it on how you report your foreign income. Your choice between the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC) determines whether your income counts toward refund eligibility.
If you claim the FEIE, your excluded income no longer counts as earned income for the ACTC formula. And since you need at least US$2,500 of earned income to qualify, that usually eliminates the refundable portion of the credit.
But if you use the FTC instead, your income still counts, keeping you eligible for the refund, assuming you meet the other requirements.
Let’s compare:
|
Example |
Filing choice |
Earned income counted |
Refundable ACTC eligible? |
|
Family in Australia earning US$120,000 while using FEIE |
FEIE claimed |
US$0 (income is excluded) |
✘ No refund |
|
Family in the UK earning US$120,000 while using FTC |
FTC claimed |
US$120,000 (counts as earned) |
✔ Possible refund |
So, even though both families earn the same income abroad, only one keeps access to the refundable credit.
That’s why many expats weigh their options: use the FEIE to avoid US tax, or the FTC to stay eligible for refundable credits like the ACTC.
How do you calculate the ACTC?
Here’s the basic 2025 formula:
Refund = 15% × (Earned Income – US$2,500)
→ capped at US$1,700 per child
Quick example:
|
Details |
Amount |
|
Earned income |
US$20,000 |
|
Income above threshold |
US$17,500 |
|
15% of excess |
US$2,625 |
|
Refund per child (cap) |
US$1,700 |
Here’s how that works: you start with US$20,000 of earned income.
The IRS ignores the initial US$2,500, the minimum income threshold you must pass before the refund starts to build. The amount above the threshold (US$17,500) is multiplied by 15%, resulting in US$2,625.
However, the refundable part of the Child Tax Credit is capped at US$1,700 per child. So even though your calculation shows US$2,625, you can’t claim more than US$1,700 for each child.
If you have two children, your total refund would be US$3,400 (US$1,700 × 2).
If your earned income falls below US$2,500, the formula doesn’t apply; you’d receive no refundable credit at all.
Tip: Self-employed expats can count net business income as earned income, which can help them qualify even while working abroad.
See if your qualifying child can get up to $1,700 with ACTC.
FEIE vs. FTC: Which strategy helps expats keep their ACTC refund?
The Foreign Tax Credit usually wins if your goal is to claim the refundable credit.
Think of it as a fork in the road:
- Path 1 – FEIE: Exclude your foreign salary → no taxable income, but also no “earned income” for refund calculation.
- Path 2 – FTC: Report income and pay foreign taxes → you may owe no US tax anyway, and your earned income still counts for the ACTC.
A quick decision guide:
|
Situation |
Better option for ACTC |
|
You live in a high-tax country (UK, France, Australia) |
FTC – foreign taxes usually offset US tax, keeping refund eligibility |
|
You live in a no-tax country (UAE, Qatar, Saudi Arabia) |
FEIE – but you’ll likely lose the ACTC refund |
|
You’re self-employed abroad |
Depends – FEIE can block refund; FTC may be better if you pay foreign self-employment tax |
Will the Additional Child Tax Credit expand again after 2025?
It’s not guaranteed. The One Big Beautiful Bill (OBBBA) bumped the Child Tax Credit to US$2,200 per child for 2025 and kept the US$1,700 refundable cap. However, many of these changes expire after 2028 unless Congress extends them.
Lawmakers have floated ideas to restore full refundability, like in 2021, when families could receive the entire credit as cash. But for now, 2025 rules remain: 15% phase-in, US$2,500 income floor, and US$1,700 max refund.
If you’re an expat planning long-term, it’s smart to watch how future laws evolve, especially if your eligibility hinges on whether your income counts as “earned.”
FAQs
-
Can expats get the refundable Child Tax Credit if they claim FEIE?
Not usually. Once you exclude all your foreign income using FEIE, your earned income becomes zero, so you can’t claim the refundable part. You may still claim the non-refundable portion if you owe any US tax.
-
How much income do expats need to qualify for the ACTC?
-
Can self-employed expats claim the ACTC?
-
Do foreign tax payments count as “earned income”?
-
How can expats receive their ACTC refund if they live abroad?
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