Child Tax Credit for Expats: Refundable Credits and the FEIE Trap

The child tax credit for expats is worth up to $2,200 per qualifying child for tax years 2025 and 2026, and up to $1,700 per child is refundable, so an American family in the UK can receive a cash refund even when it owes no US tax. The catch is the foreign earned income exclusion: claim it, and the refundable part is switched off for the year.

Most American parents in the UK pay more income tax to HMRC than they would owe the IRS on the same salary. That makes the US return feel like paperwork with no money attached. The child tax credit is the exception. Filed the right way, the US return becomes a source of income for the family. Filed the wrong way, the same family receives nothing, and nothing on the return tells them what they missed.

This guide explains how the credit works for Americans abroad, the Social Security number rules that tightened from tax year 2025, how the foreign earned income exclusion blocks the refund, and how to recover the credit if you have been using the exclusion. US/UK Cross Border Tax — US CPAs and UK tax advisers working as one team; London, Manchester, New York, San Francisco — prepares these returns every year for families on both sides.

Can Americans living abroad claim the child tax credit?

Yes. The child tax credit is not limited to families living in the United States. A US citizen or resident who files Form 1040 from London, Edinburgh or anywhere else can claim it on Schedule 8812 for each qualifying child, on the same terms as a family in Ohio.

The IRS child tax credit page sets out the tests. The child must:

• be under 17 at the end of the tax year;
• be your son, daughter, stepchild, eligible foster child, sibling, step-sibling, half-sibling or a descendant of one of them;
• live with you for more than half the year and not provide more than half of their own support;
• be claimed as your dependent;
• have a Social Security number valid for employment, issued before the due date of the return including extensions.

There is no rule that the child must live in the United States. A child who lives with you in Bristol meets the residence test in the same way as a child who lives with you in Boston. What matters is the relationship, the age, the Social Security number and how you treat your own foreign income on the return.

How much is the child tax credit for expats in 2025 and 2026?

For tax year 2025 the maximum child tax credit is $2,200 per qualifying child, according to the 2025 Schedule 8812 instructions. For tax year 2026 the amount stays at $2,200 after the annual inflation adjustment, and the refundable portion stays at $1,700, according to Rev. Proc. 2025-32.

The credit has two parts, and the split is what matters to expats:

Part	What it does	Maximum per child (2025 and 2026)	Available with the FEIE?
Child tax credit (nonrefundable)	Reduces US income tax you still owe after other credits	$2,200	Yes, but usually worthless because no US tax is left
Additional child tax credit (refundable)	Paid to you as a refund once your US tax is zero	$1,700	No
Credit for other dependents	Nonrefundable credit for dependents who do not qualify for the child tax credit	$500	Yes, but nonrefundable

The refundable additional child tax credit has a second limit. It cannot exceed 15% of your earned income above $2,500. A parent earning the equivalent of $30,000 can receive up to $4,125 under that test (15% of $27,500), so most working families reach the $1,700 per child cap well before the earned income limit bites.

The income phase-out

The credit starts to shrink once modified adjusted gross income passes $400,000 on a joint return or $200,000 for every other filing status. Schedule 8812 reduces the combined credit by 5% of the excess, rounding the excess up to the next $1,000, which works out at $50 for each $1,000 over the line.

For expats the important detail is on line 2b of Schedule 8812: income excluded on Form 2555 is added back before the threshold test. Excluding a UK salary does not lower your income for phase-out purposes. A family on a combined $450,000 has $50,000 over the joint threshold and loses $2,500 of credit whether or not it uses the exclusion.

Why the FEIE blocks the refundable child tax credit

The Schedule 8812 instructions put it in one sentence: if you file Form 2555, you cannot claim the additional child tax credit. IRS Publication 54 says the same for the foreign housing exclusion and the foreign housing deduction.

That rule turns a common filing choice into an expensive one. The foreign earned income exclusion lets a qualifying American abroad exclude up to $132,900 of foreign earned income for tax year 2026 (Rev. Proc. 2025-32). It is simple and it often reduces US tax to zero. But once the salary is excluded, there is no US tax for the nonrefundable child tax credit to reduce, and the refundable part is not allowed. The credit is lost in full.

The foreign tax credit reaches the same zero US tax by a different route. It credits the UK income tax already paid against the US tax on the same income, claimed on Form 1116 and reported on line 1 of Schedule 3. Because UK income tax on a salary is usually at least as high as US tax, the US bill on the wages is often wiped out. Nothing in the foreign tax credit route stops the additional child tax credit, so the refund survives.

We compare the two methods across the whole return, including IRA room and carryovers, in our guide to choosing between the FEIE and the foreign tax credit in the UK. For families with children, the child tax credit is usually the deciding factor.

Illustrative example

Illustrative example: a married couple, both US citizens with Social Security numbers, live in Manchester with two children aged 6 and 9 who also have Social Security numbers. One parent earns a UK salary equal to $90,000; the other has no earnings. They file jointly for tax year 2026. Assume the UK income tax on the salary is more than the US tax on it, and they have no other income.

Route 1, foreign earned income exclusion: the $90,000 is excluded on Form 2555. US income tax is zero. The nonrefundable child tax credit has nothing to reduce, and the additional child tax credit is not allowed. Refund: $0.

Route 2, foreign tax credit: the salary is taxed on the US return and the UK tax is credited on Form 1116, bringing US income tax to zero. The family's total child tax credit is $4,400 (two children at $2,200). None of it is used against tax, so Schedule 8812 tests the refundable part: the cap is $3,400 (two children at $1,700), and 15% of earned income above $2,500 is $13,125. The lower figure applies. Refund: $3,400.

The same family, the same income and the same UK tax produce a $3,400 difference in one year, simply from the choice of method. Actual results depend on exchange rates, other income and the full return.

Social Security number rules for children born in the UK

The Social Security number rules are where many expat families lose the credit before the foreign income question even arises.

For tax year 2025 onward, three requirements apply under the Schedule 8812 instructions:

1. The child needs a Social Security number valid for employment, issued before the due date of the return including extensions. A child with only an ITIN cannot be used for the child tax credit.
2. The taxpayer also needs a valid Social Security number. On a joint return only one spouse needs one; the other needs an SSN or an ITIN issued by the due date.
3. The credit for other dependents, worth $500, remains available for a dependent with an SSN, ITIN or ATIN, but only if that person is a US citizen, US national or US resident alien.

A child born in the UK to an American parent is usually a US citizen at birth, but the paperwork does not happen on its own. Parents normally register the birth with the US Embassy through a Consular Report of Birth Abroad and then apply for the child's Social Security number. The US Embassy in London's Social Security page explains how applications are handled from the UK, and the SSA's leaflet on numbers for children lists the documents. The SSA has to verify a foreign birth record, which can add weeks to the process, so start early.

The timing rule is generous in one respect: the number only has to be issued by the return's due date including extensions. An American whose tax home and home are outside the United States on April 15 gets an automatic extension to June 15 under Publication 54, and can extend further to October 15 on Form 4868, which gives a family time to obtain a newborn's number before filing.

Mixed-nationality couples

An American married to a British spouse can file jointly only by electing to treat the spouse as a US resident, which brings the spouse's worldwide income onto the US return, and the spouse then needs an SSN or ITIN, according to Publication 54. Many such families file as married filing separately or, where the tests are met, as head of household. The American parent can still claim the credit on that return for children who meet the tests. We cover the wider choices in our guide to tax planning for US/UK mixed couples.

What people get wrong about the child tax credit abroad

• Assuming expats are not eligible. There is no US residence test for the child or the parent. The credit is available on any Form 1040 that meets the rules.
• Using the exclusion by default. Software and some preparers default to Form 2555 because it is simple. For a family with children and a UK salary taxed at UK rates, that default can cost up to $1,700 per child every year.
• Thinking the exclusion helps with the phase-out. Excluded income is added back on Schedule 8812 line 2b, so it does not keep a high earner under the $200,000 or $400,000 threshold.
• Forgetting the child's Social Security number. A UK birth certificate and a British passport do not give the child a US number. Without one the child can only support the $500 nonrefundable credit, and only if the child is a US citizen.
• Switching back and forth. Claiming the additional child tax credit in a later year counts as revoking the foreign earned income exclusion, and re-electing the exclusion within 5 years needs IRS approval, according to the IRS revocation guidance. Decide once, on a multi-year view.
• Expecting the refund early. The IRS cannot issue refunds before mid-February on returns that claim the additional child tax credit, and the hold applies to the whole refund.

How to claim the child tax credit as an expat: step by step

1. Confirm each child qualifies. Check age at year end, relationship, residence with you for more than half the year, dependency and a valid Social Security number.
2. Confirm your own number. You, or one spouse on a joint return, need a valid Social Security number by the due date; the other spouse needs an SSN or ITIN.
3. Choose the foreign income method. Model the year under the foreign tax credit and the exclusion. With children and a UK salary, the foreign tax credit usually wins. Our page on foreign tax credit relief for UK income explains how Form 1116 credits UK tax.
4. Complete Schedule 8812. Part I works out the credit and the phase-out; Part II-A works out the refundable additional child tax credit from earned income.
5. File on time or extend. The automatic June 15 extension for Americans abroad applies to filing, while interest on any tax due runs from April 15.
6. If you used the exclusion in past years, review them. Amending a recent year from the exclusion to the foreign tax credit may recover the refundable credit, within the normal time limits for refund claims.

Catching up: the child tax credit on missed or past returns

Families who have never filed US returns often worry only about penalties. Under the Streamlined Foreign Offshore Procedures, a non-wilful American abroad files returns for the most recent 3 years and FBARs for the most recent 6 years; our guide to the Streamlined Filing Compliance Procedures walks through the process. Each of those returns is a complete Form 1040, so it can include Schedule 8812 where the children and parents had valid Social Security numbers in time.

If the catch-up returns use the foreign tax credit, the refundable credit can partly or fully offset any US tax due on other years, or produce refunds where the normal time limits for claiming them allow. This is one reason we do not recommend filing catch-up returns on the exclusion by default.

Getting the child tax credit right for your family

The child tax credit for expats is one of the few places where the US return can put money back into an American family's UK household. Getting it depends on three things: Social Security numbers for the children and at least one parent, the foreign tax credit rather than the exclusion where the family wants the refund, and a return that applies the phase-out with excluded income added back.

Our child tax credit for expats and family tax service brings the US and UK sides of a family's affairs together, and our US individual tax return service prepares Form 1040, Schedule 8812 and Form 1116 alongside your UK Self Assessment. For the bigger picture, see our guide to US and UK tax services for families. When you are ready, contact us and we will review which method your family should be using.