Save Even More Money with US Taxes

January 17, 2022 | | 2 minute read
Expat Tax Guide | Everything you need to know about filing taxes abroad in 2022

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If you have a family, you can save money with US taxes through the child tax credit and foreign housing exclusion.

The child tax credit allows you to get refundable credit of up to $1,400 per child. Qualified housing expenses over €16,944 may help you become eligible for US tax exemption.

The Child Tax Credit & Additional Child Tax Credit

The US provides financial assistance to parents in the form of tax credits and refunds, regardless of where they live and work.

The Child Tax Credit is normally the non-refundable portion of this credit, while the Additional Child Tax Credit just refers to the refundable portion. In this sense, ‘additional’ does not mean an additional credit or additional child! MyExpatTaxes specializes in getting US Expats their due Additional Child Tax Credit, even if that means amending prior year returns. To see if you are eligible for the refund, check out our Tax Tips for the American Family Abroad.

For 2021, there are a LOT of changes to the (Additional) Child Tax Credit due to the pandemic. We’ll put side by side the changes

Tax Year 2020Tax Year 2021
Max Age Limit17 years old18 years old
Child Tax Credit Amount$2,000$3,600 – Under 6
$3,000 – 6 and above
Additional Child Tax Credit Amount$1,400$3,600 – Under 6
$3,000 – 6 and above
Other Dependent Credit$500$500

Max Age Limit

Only qualifying children dependents under the max age limit are eligible for the (Additional) Child Tax Credit. If your child was UNDER the max age limit on December 31st of that tax period, they are eligible. Otherwise, they will fall into the “Other Dependent” Credit bucket.

For example, your child turned 18 on December 1st, 2021. They are not UNDER 18, so they are not eligible for the (Additional) Child Tax Credit on your 2021 Tax Return.

Child Tax Credit:

For 2020 Tax Returns
A $2,000 tax credit can be claimed by American expat families for each of their dependent children who have valid US Social Security Numbers, and are under the age of 17.

For 2021 Tax Returns
A $3,600 tax credit can be claimed by American expat families for each of their dependent children who have valid US Social Security Numbers, and are under the age of 6.

A $3,000 tax credit can be claimed by American expat families for each of their dependent children who have valid US Social Security Numbers, and are under the age of 18.

Additional Child Tax Credit

For 2020 Tax Returns
If families do not owe US taxes then a max of $1,400 of the $2,000 credit per qualifying child is refundable.

For 2021 Tax Returns
For those who have lived in the US for more than half of 2021: If families do not owe US taxes then the entire amount of the Child Tax Credit is refundable, so up to $3,600 per qualifying child under age 6 and $3,000 per qualifying child between age 6 and 17 (under age 18).

For those who have NOT lived in the US for more than half of 2021: If families do not owe US taxes then a max of $1,400 of the $2,000 credit per qualifying child is refundable.

This means you might be able to get money back even if you don’t pay any income taxes to the US. The team at MyExpatTaxes can quickly figure out if you can get this refundable credit of up to $1,400 per child per year!

Foreign Housing Exclusion

The Foreign Housing Exclusion allows US citizens abroad to deduct any excess of housing expenses, paid by the employer over 16% of the Foreign Earned Income Exclusion (FEIE) amount of that year ($108,700 in 2022 for the 2021 tax season). Qualified housing expenses over $17,392 might be eligible for US tax exemption. However, there is a limit to how much foreign housing expenses you can deduct (more below).

In addition to foreign housing expenses, you can also get an exclusion from the following: home utilities, personal property insurance, accessory rentals, and household repairs. The exclusion does not include furniture you purchase online, domestic labor, and mortgage payments.

Qualify for the Foreign Housing Exclusion

To qualify for this expat tax benefit and save money with US taxes, you need to be qualified for the FEIE through this:

  1. Pass the Physical Presence Test or the Bona Fide Resident Test
    1. To pass the Physical Presence Test: You need to be outside of the US for 330 full days in a consecutive 12 month period, that begins or ends in the tax year.
    2. To pass the Bona Fide Rest Test: You need to be a resident in a foreign country and be subject to local income taxes for at least a full tax year.

Once you are certain you qualify for the FEIE, you can fill out Form 2555 informing the IRS of which test you qualify under. Or better yet, fill it out electronically through our software!

The MyExpatTaxes software can determine if you qualify for this exclusion and receive a refund. Want to learn more about the Foreign Housing Exclusion tax benefit? Read this.

Written by Michelle H.

January 17, 2022 | | 2 minute read

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