Foreign tax credit + child benefit

[zalmyT]

Hello,

I live in Canada and have no US income. Myself spouse and 2 children are all dual citizens. 

I am filing my USA taxes and wish to claim the foreign take credit while also benefiting from the Child benefit ( which i bealive is $1400 or $1500 per child). 

As i understand it, you have to show some income to get the child benefit. Am i able to deduct only the foreign income amount which will net $0 owing but still gain the $2800-3000 child benefit? 

[Vanessa A]

No. If you are talking about the Child Tax Credit, yes, you have to have earned income in order to claim it so if you took the foreign income exclusion, you would not be able to claim it. 

The Child Tax Credit is a non-refundable credit that just lowers your tax liability.  Then there is the Additional Child Tax Credit which is worth up to $1,700 per child.  This again, does require that you have earned income.  

[zalmyT]

Thanks for your response. So I bealive i am reffering to the Additional Child Tax Credit which is up to $1700 now. In order to receive that credit and $3400, would i be able to exlude a majority of my income based on foreign credit ( ie: not all of it) to ensure there is adequate earned income. Is this do-able ising TurboTax? 

Thanks

[Vanessa A]

No.  You cannot "save" just enough income to get the Additional Child Tax Credit.  You would have to exclude the full amount available, if you choose the Foreign Earned Income Exclusion, for the tax year which is $126.500 for tax year 2024.  If you use the Foreign Earned Income Exclusion, you do not qualify for the Child Tax Credit or additional child tax credit

(Edited 3/11/25 @ 2:27PM PST) @zalmyT 

[zalmyT]

Thank you once again for your response. 

What is the minumum amount of income one needs to have in order to qualfy for the refundable Additional Child Tax Credit? 

[SusanY1]

If you have Form 2555 (Foreign Earned Income Exclusion) on your return, you can't get the refundable additional child tax credit (ACTC). (See notes about this HERE.)   This applies even when income exceeds the exclusion amount.  

In your initial question, you mentioned taking the foreign tax credit.  Using this method, you are eligible for the ACTC, assuming you otherwise meet the qualifications.  

You can take a credit (on Form 1116) that fully lowers your tax to $0 and still receive the refundable ACTC.  However, if you take the exclusion you are not eligible for the refundable portion of the credit.

You must have a minimum of $2,500 of earned income to qualify for the credit, but it's okay if the tax calculated is offset fully by the foreign tax credit.  

CAUTION: If you have filed in the past using the Foreign Earned Income Exclusion (Form 2555), failing to file it when you have foreign earned income results in revocation of the exclusion.  Once revoked, you cannot use the exclusion again until the 6th tax year after revocation without written permission from the IRS.  This can be important in some cases, so you want to proceed carefully before revoking the exclusion, if applicable.