Can US Expats Claim the Child Care Credit While Living Abroad?
Yes, US expats can absolutely claim the Child and Dependent Care Credit while living abroad. In fact, for tax year 2025, working households can claim a portion of child care expenses on their annual taxes – up to $3,000 for one child or qualifying dependent and up to $6,000 for two or more children. This means American parents living overseas can significantly reduce their US tax liability while covering the essential costs of childcare.
Whether you’re paying for a daycare center in London, a nanny in Singapore, or an after-school program in Mexico City, you may be eligible for this valuable tax break. This non-refundable credit allows you to offset 20% to 35% of qualifying childcare expenses, potentially saving you hundreds or even thousands on your US tax bill.
What Is the Child and Dependent Care Credit for Expats?
The Child and Dependent Care Credit is a dollar-for-dollar reduction in your actual tax owed to the IRS – not a deduction that merely lowers your taxable income. The credit is calculated based on your income and a percentage of expenses that you incur for the care of qualifying persons to enable you to go to work, look for work, or attend school.
For 2025, the credit covers:
- 20% to 35% of qualifying expenses
- Up to $3,000 in expenses for one qualifying child or dependent
- Up to $6,000 in expenses for two or more qualifying children or dependents
This means the maximum credit you can receive is $1,050 for one child (35% of $3,000) or $2,100 for two or more children (35% of $6,000).
Who Qualifies as a Qualifying Person?
A qualifying individual for the child and dependent care credit is:
- Your dependent qualifying child who was under age 13 when the care was provided
- Your spouse who was physically or mentally incapable of self-care and lived with you for more than half of the year
- An individual who was physically or mentally incapable of self-care, lived with you for more than half of the year
How Does the Child Care Credit Differ from the Child Tax Credit?
This is where many expat families get confused. The Child and Dependent Care Credit and the Child Tax Credit are completely separate benefits that serve different purposes:
| Feature | Child and Dependent Care Credit | Child Tax Credit |
| Purpose | Reimburse actual childcare expenses | General financial support for families |
| Maximum Amount (2025) | $1,050 (1 child) / $2,100 (2+ children) | $2,200 per child |
| Refundable? | No (non-refundable) | Partially (up to $1,700 per child) |
| Age Limit | Under 13 (or disabled dependent) | Under 17 |
| Expenses Required | Must pay for actual care expenses | No expenses required |
| Income Limits | No upper limit (percentage decreases) | Phases out at $200K single / $400K married |
| Credit Percentage | 20% to 35% of expenses | Fixed dollar amount |
| FEIE Impact | Cannot claim if all income excluded | Cannot claim if all income is excluded |
| Form Required | Form 2441 | Schedule 8812 |
| Work Requirement | Must work or look for work | No work requirement |
| Provider Documentation | Need provider info (LAFCP for foreign) | No provider documentation needed |
The great news? If you qualify for both, you can claim them in the same tax year. They address different family financial needs and don’t conflict with each other.
Can I Claim This Credit if I Use the Foreign Earned Income Exclusion?
Here’s the critical rule expats need to know: If you exclude all your taxable income using the Foreign Earned Income Exclusion (FEIE), then you cannot claim the child care credit. This is because the credit requires earned income on your US tax return.
However, if you were not able to reduce all your taxable income using the FEIE, you can claim the child care tax credit on your US expat tax return.
Many expat families with children find it more beneficial to use the Foreign Tax Credit instead of the FEIE specifically because it preserves their ability to claim family-related credits. Consider which strategy works better for your family situation.
How Do I Report Foreign Childcare Providers?
Living abroad doesn’t complicate the paperwork as much as you might think. If you are living abroad, your care provider may not have, and may not be required to get, a U.S. taxpayer identification number (for example, an SSN or EIN). If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider’s taxpayer identification number.
This special code eliminates the usual requirement to provide your childcare provider’s Social Security Number or Employer Identification Number – something that would be impossible for most foreign providers.
What Percentage Can I Claim Based on My Income?
Your credit percentage depends on your adjusted gross income (AGI):
| Adjusted Gross Income | Credit Percentage |
| $15,000 or less | 35% |
| $15,001 – $17,000 | 34% |
| $17,001 – $19,000 | 33% |
| Each $2,000 increase | Decreases by 1% |
| $43,000 and above | 20% |
For instance, if you have one qualifying dependent and your AGI is under $15,000, the most your credit could be worth is $1,050 (35% of $3,000).
What Childcare Expenses Qualify While Living Abroad?
Expenses paid for the care of a qualifying individual are eligible if the primary reason for paying the expense is to assure the individual’s well-being and protection.
Qualifying expenses include:
- Daycare center fees
- Nanny or babysitter costs
- After-school programs
- Summer day camps (but not overnight camps)
- Household services if they include care for your qualifying person
Non-qualifying expenses:
- Overnight camps
- Educational expenses (like private school tuition)
- Medical care
- Food costs
- Transportation (unless part of the care provider’s service)
The credit is designed to help families recuperate expenses while working outside the home. Working parents can only claim expenses up to their earned income.
Real Example: American Family Working in Brazil
Let’s look at Blake and Laura, two American expats working in Brazil with one child, Cole. They earn $75,000 each ($150,000 combined AGI) and paid $6,000 for daycare expenses.
Based on their income level, they qualify for a 20% credit rate. With one child, their maximum qualifying expenses are $3,000, so their potential credit is $600 (20% of $3,000).
On Form 2441, they would:
- List their Brazilian daycare provider’s name and address
- Enter “LAFCP” instead of a US tax identification number
- Report $3,000 in qualifying expenses
- Calculate their $600 credit
Since this is a non-refundable credit, it can only reduce their US tax liability to zero; it won’t generate a refund beyond what they owe.
How Do I File for This Credit?
To claim this credit, you must file Form 2441 with your US tax return. If you paid someone to care for your child or other qualifying person so you could work or look for work, you may be able to take the credit for child and dependent care expenses.
You generally cannot file as “Married Filing Separately” and claim this credit. There are limited exceptions for legally separated couples or those living apart under specific circumstances.
Keep Detailed Records
Maintain receipts and documentation for all childcare expenses. Your credit is a percentage of your work-related expenses, which are subject to the earned income limit and the dollar limit.
Should I Choose FEIE or Foreign Tax Credit for My Family?
This is a strategic decision that can significantly impact your overall tax savings:
- High-tax countries (like Germany, France, Sweden): Consider using the Foreign Tax Credit (Form 1116)instead of FEIE to preserve eligibility for family credits.
- Low-tax countries (like UAE, Singapore, certain Caribbean nations): You may have remaining US tax liability even after foreign tax credits, making the childcare credit valuable.
Many expat families initially choose the Foreign Earned Income Exclusion (Form 2555) without considering family credits. If you have children and significant childcare expenses, it’s worth calculating both scenarios to see which provides greater overall savings.
Digital Nomad Families and Frequent Movers
If you’re frequently moving between countries, you can still qualify as long as your child lives with you for more than half the year and you have qualifying expenses in each location. The key is maintaining proper documentation regardless of how often you relocate.
What Are My Next Steps?
The Child and Dependent Care Credit can provide meaningful tax savings for American families living abroad. However, the interaction between foreign income treatment and family credits requires careful planning.
If you’re ready to maximize your expat tax benefits:
- Gather your childcare expense receipts and provider information
- Consider whether the Foreign Tax Credit or FEIE works better for your family situation
- File Form 2441 with your annual tax return
- Remember, you may also need to file FBAR if your foreign accounts exceed $10,000
Have questions about the process or next steps? If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions on expat taxes or working with Greenback, contact our Customer Champions.
Whether you’re years behind or just unsure about the thresholds, our team is ready to help.
This article is for informational purposes only and should not be considered as personalized tax advice. Tax laws are complex and subject to change. Always consult with a qualified tax professional regarding your specific situation.
