American citizens are entitled to receive up to $2,000 in tax credit for each of their American children. Of these $2,000, up to $1,400 can be received as a tax refund directly to the US bank account or by mail. In order to get the refund, the parent must have a personal exertion earnings – i.e., salary or income for self-employment. Entitled applicants must have an income greater than $2,500 and lower than $200,000 ($400,000 for an American couple). Beyond that, the refund will start to offset.
The child must be registered as a dependent in their parents’ report. There are several additional tests the parent must pass in order to be eligible:
1. The child must be under 17 years of age;
2. The child must be a descendant of the reporter, or the child/step- or adopted sibling, or their descendant;
3. The child is financially supported by their parents for over 50% of their needs;
4. The child has lived with their parent for at least 50% of the tax year;
5. The child is a US citizen or resident and has an SSN. The child should have their SSN by the time the report is handed in, including extensions.
Should the child not be eligible for an SSN, a CTC in the sum of $500 per child can be claimed in retrospect, and cannot be received as a tax return.
It is important to note that the return is not eligible for citizens reporting the 2555 and claiming a Foreign Earned Income Exclusion (FEIE).
Indeed. There are no criteria that determine a place of residence, and so every US citizen with American dependents under 17 can be eligible. Note that the portion of the credit that can also be received as a tax refund is nullified in case form 2555 is used and an FEIE is claimed.
As a rule, the credit cannot be claimed without an SSN. If the child is eligible for an SSN but still hasn’t received one, contact the US Embassy immediately and try to attain an SSN before taxes are due (including extensions). This can be done until October 15th of the following year.
A CTC is claimed using form 8812 in addition to the parents’ 1040 tax report.
CTCs not taxable in either Israel or the US.
The CTC is limited to dependents with an SSN. American residents such as your children who are not eligible for an SSN but are still considered residents are eligible for an ODC credit – a tax credit of up to $500 per child, with no possibility of a return. This requires them to have an ITIN. Reports must be handed in on time.
