OBBBA’s Child Tax Credit Rules Quietly Sideline Expat Families
A new Treasury analysis released in June 2026 emphasizes how broadly the credit reaches families, after the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, raised the maximum credit from $2,000 to $2,200 per qualifying child and indexed it to inflation.
The same 2025 law that raised the Child Tax Credit also added a work-eligible Social Security number test and left a Foreign Earned Income Exclusion trap, two rules that can shrink or erase the credit for Americans raising children abroad. Treasury’s data, published in June 2026, shows the credit now reaching nearly every U.S. family with children. According to the IRS, the maximum is now $2,200 per qualifying child, with up to $1,700 refundable through the Additional Child Tax Credit for the 2025 tax year. For families overseas, that headline reach hides two gaps that the filing data never mentions.
Treasury’s Reach Numbers Skip the Rules That Apply Abroad
The Treasury analysis frames the One Big Beautiful Bill Act changes as a near-universal win, and for most families in the United States, it is. The credit rose to $2,200 per child, will adjust for inflation each year, and keeps its phase-out at $200,000 of income, or $400,000 for married couples filing jointly.
| Feature | 2025 Tax Year | Key Condition |
|---|---|---|
| Maximum credit per child | $2,200 | Indexed to inflation going forward |
| Refundable portion (ACTC) | Up to $1,700 | Requires at least $2,500 of earned income |
| Phase-out begins | $200,000 / $400,000 | Single/married filing jointly |
| Parent’s SSN | Work-eligible SSN required | You, or your spouse if filing jointly |
| Child’s SSN | Work-eligible SSN required | Issued before the filing deadline |
What the reach numbers leave out is that two of those conditions behave very differently once a family lives outside the country. Americans abroad already file the same Form 1040 for their worldwide income, and now they face an added SSN test and a choice about foreign income that can quietly cost them their refund.
OBBBA Added a Work-Eligible SSN Test for the Parent, Not Just the Child
Before 2025, the qualifying child needed a Social Security number. The OBBBA extended that requirement to the person claiming. To take the credit, you, or your spouse if you file jointly, must now hold a Social Security number valid for U.S. employment, and the child still needs a work-eligible SSN issued before the return’s due date, including extensions.
At least one parent on the return must hold that number, so a U.S. citizen abroad who has kept an active SSN still qualifies even when married to a non-citizen. The families who lose out are narrower and more specific: households where neither parent has a work-eligible SSN, and parents of U.S.-citizen children born abroad who have never applied for the child’s number.
If your spouse files with an ITIN rather than an SSN, the credit can still stand on your number, a wrinkle covered in our guide to filing jointly with a foreign spouse and the Form W-7 ITIN process.
The FEIE Can Erase the Refundable Credit Expat Families Count On
The costlier trap for most expat parents is not the SSN rule. It is how they remove foreign income from the U.S. return. Claiming the Foreign Earned Income Exclusion on Form 2555 bars the refundable Additional Child Tax Credit on the excluded income. The Foreign Tax Credit, claimed on Form 1116, works the other way: it offsets U.S. tax rather than eliminating the income, preserving the refundable portion.
| Approach | What it does | Effect on the refundable credit |
|---|---|---|
| Foreign Earned Income Exclusion | Excludes foreign earned income from U.S. tax | Forfeits the refundable credit on excluded income |
| Foreign Tax Credit | Credits foreign tax paid against your U.S. tax | Keeps earned income on the return, can preserve the refund |
Consider a married couple in Germany with two qualifying children and $90,000 of foreign salary. Exclude all of it with the FEIE, and their income drops toward zero, taking the refundable credit with it and leaving up to $3,400 unclaimed. Claim the Foreign Tax Credit for the German tax already paid, and they can often wipe out their U.S. bill and still collect the refund.
The math turns on your income, your country’s tax rates, and your longer plans, which is why weighing the FEIE against the Foreign Tax Credit matters before you commit to either.
A Few Steps to Protect Your Credit Before You File
- Confirm that you, or your spouse, holds a Social Security number valid for U.S. employment.
- Apply for an SSN for any U.S.-citizen child who does not have one, well before your return’s due date.
- Run your refund both ways, under the FEIE and under the Foreign Tax Credit, before locking in either.
- Check your earned income against the $2,500 floor required for the refundable credit.
- Report your children on Form 1040 and attach Schedule 8812 to claim the credit.
- If a child does not qualify, see whether the $500 Credit for Other Dependents applies instead.
The FEIE-versus-credit decision is where most expat families leave money behind, and it is the kind of cross-border math a specialist in the Child Tax Credit for Americans abroad can run before you file. If you are behind on returns, the Streamlined Filing Compliance Procedures can let you catch up and claim the credit for past years.
Frequently Asked Questions about the OBBBA Child Tax Credit
Yes. Starting with the 2025 tax year, the parent claiming the credit, or at least one spouse on a joint return, must have a Social Security number valid for U.S. employment, and the qualifying child must still have a work-eligible SSN. The credit is denied only when no parent has one.
It affects the refundable part. Excluding income on Form 2555 forfeits the refundable Additional Child Tax Credit on that income, while the Foreign Tax Credit can preserve it. Many families compare the two before filing.
How Greenback Helps Expat Families Get the Credit Right
The SSN rules, the refundable threshold, and the choice between the FEIE and the Foreign Tax Credit all interact in ways that are easy to get wrong from abroad. Greenback’s expat tax accountants handle that full picture, from your worldwide income to the schedules that claim the credit, so your family receives everything it qualifies for. If you are catching up on past years, they can help you file those returns and claim the credit you may have missed.
File Knowing Your Child Tax Credit Is Done Right
The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
