Family Tax Benefits for Expats Living Abroad in 2024

Living abroad with your family can be an exciting adventure, but don’t forget your tax obligations as a US expat. No one wants to owe taxes or risk getting in trouble, so you should know what tax benefits are available for you and your family.

In this article, there are a few family tax benefits to remember as an expat family living abroad. These tax tips can help you claim as many deductions and credits as possible. All while keeping your hard-earned money in your pocket!

Child Tax Credit (CTC)

American expats may be eligible to take advantage of the Child Tax Credit (CTC) when filing their US taxes. The CTC allows parents to receive up to $2,000 as a non-refundable credit on their taxes for each dependent child under 17 with a valid Social Security Number. Those who don’t owe US taxes can claim upwards of $1,700 as a refundable amount – meaning additional income!

To claim the refundable portion of the CTC, US expats must forfeit the use of Foreign Earned Income Exclusion (FEIE). Another option is the Foreign Tax Credit (FTC); this credit will still qualify you for the CTC and reduce your tax liability.

Child and Dependent Care Credit

The Child and Dependent Care Credit is a tax benefit meant to help parents or caregivers with managing the costs of their dependents. This credit can only be claimed if your children are under the age of 13 or for other dependents who have a physical or mental disability that makes it so they cannot care for themselves.

This credit supports taxpayers with costs like daycare, babysitters, summer camps, or home care providers. However, this credit has its limits as well, such as if you can only claim up to $3,000 for one dependent or up to $6,000 for two or more dependents. Additionally, if you’re earning over $43,000, you will only be able to receive 20% as a refundable amount.

Foreign Earned Income Exclusion (FEIE)

Most Americans living abroad use the Foreign Earned Income Exclusion as a common method for avoiding double taxation. Whether the FEIE tax benefit is best for an expat family will depend on the situation; it can reduce US tax liability, but it has its own requirements.

To qualify for this tax benefit, taxpayers must pass the Physical Presence Test or the Bona Fide Resident Test as an American living abroad.

• For the Physical Presence Test, the taxpayer must have been outside of the United States for 330 full days within a consecutive 12-month period beginning or ending in the tax year.
• For the Bona Fide Resident Test, the taxpayer must be a resident in another country and be subject to local income taxes for a minimum of an entire tax year (January 1st to December 31st).

After passing one of these residency tests, expats can deduct up to $126,500 of foreign-earned income from their US tax liability by submitting Form 2555 with their US tax return.

Foreign Housing Exclusion

The Foreign Housing Exclusion is a provision within the FEIE that can be a helpful family tax benefit. An expat family living abroad may be eligible to deduct up to $37,950 in excess housing expenses, including rent, utilities, household repairs, personal property insurance, and more.

It’s important to note that mortgage payments do not qualify.

Foreign Tax Credit (FTC)

The Foreign Tax Credit is another viable option for lowering US tax liabilities as an American abroad. The FTC is a dollar-for-dollar credit based on what was paid in foreign income taxes; it allows taxpayers to offset any US taxes. For an expat family living in a high-tax country such as Germany, the FTC can be incredibly beneficial. The FTC often has more advantages than the FEIE by helping expat families maximize their refunds.

Although the FTC can make it easier for an expat or an expat family to tax benefits, it is quite a hefty form to file with many calculations.

Need a Helping Hand?

As an expat family, having a helping hand like MyExpatTaxes may be what you need during tax season. Our Professional Plan will help you maximize your refundable credits and make sure you’re on the right track with the help of a Tax Professional.

Get started for free, pick a plan when you’re ready. Or see the Pricing Page for all the details.