The Additional Child Tax Credit is the refundable portion of the Child Tax Credit. For 2025, an eligible U.S. expat may receive up to $1,700 per qualifying child, even when no U.S. income tax remains due.
The most important rule for Americans abroad is that a taxpayer who files Form 2555 cannot claim the ACTC. Using the Foreign Tax Credit instead may preserve ACTC eligibility, but it does not automatically produce a refund.
This guide focuses specifically on how the refundable ACTC is calculated and how the Foreign Earned Income Exclusion and Foreign Tax Credit affect it. For the qualifying-child tests, Social Security Number requirements, income phaseouts, and Credit for Other Dependents, read our complete guide to the Child Tax Credit for U.S. citizens living abroad.
Key Takeaways
- The maximum ACTC for 2025 is $1,700 per qualifying child.
- The ACTC is the refundable portion of the Child Tax Credit, not an additional credit on top of it.
- The standard calculation equals 15% of earned income above $2,500.
- The final refund is also limited by the unused Child Tax Credit.
- Taxpayers with three or more qualifying children may receive a larger amount under an alternative calculation.
- A taxpayer who files Form 2555 cannot claim the ACTC.
- Using the Foreign Tax Credit may preserve ACTC eligibility because qualifying foreign earnings remain in the earned-income calculation.
- Switching from the FEIE to the FTC may have consequences extending beyond the current tax year.
- The ACTC is calculated on Schedule 8812 and reported on Form 1040, line 28.
What Is the Additional Child Tax Credit?
The Additional Child Tax Credit is the portion of the Child Tax Credit that may be paid as a refund.
For 2025, the total Child Tax Credit is worth up to $2,200 per qualifying child. Up to $1,700 per qualifying child may be refunded through the ACTC.
The ACTC is not a separate $1,700 credit added to the $2,200 Child Tax Credit. It allows part of the unused Child Tax Credit to become refundable after the nonrefundable portion has been calculated.
For example, a taxpayer may qualify for a $2,200 Child Tax Credit but have no U.S. income-tax liability against which to use the nonrefundable credit. The taxpayer may still receive part of that unused credit as an ACTC refund if the earned-income and other requirements are satisfied.
The 2025 amounts are confirmed in the IRS instructions for Schedule 8812.
How Is the ACTC Calculated for 2025?
The standard ACTC calculation equals 15% of earned income above $2,500.
However, the earned-income formula is only one part of the calculation. The ACTC is generally limited to the smallest of:
- The unused portion of the Child Tax Credit;
- The maximum refundable amount of $1,700 multiplied by the number of qualifying children; or
- The amount produced by the earned-income calculation.
The calculation can be summarized as follows:
Earned income − $2,500
Remaining amount × 15%
If earned income is $2,500 or less, the standard formula produces no refundable ACTC.
ACTC Calculation Example
Assume a taxpayer has:
- Two qualifying children;
- $20,000 of qualifying earned income; and
- At least $4,000 of unused Child Tax Credit.
The earned-income calculation is:
$20,000 − $2,500 = $17,500
$17,500 × 15% = $2,625
The three relevant limits are:
| ACTC limitation | Amount |
|---|---|
| Unused Child Tax Credit | $4,000 |
| $1,700 maximum for two children | $3,400 |
| Earned-income calculation | $2,625 |
The taxpayer’s ACTC would be limited to $2,625, assuming all other requirements are satisfied.
The earned-income calculation is the smallest applicable amount in this example.
The complete calculation appears in Part II of the 2025 Schedule 8812.
What Counts as Earned Income for the ACTC?
Earned income generally includes compensation received for working and net earnings from self-employment.
Common examples include:
- Wages;
- Salaries;
- Tips and other taxable employee compensation;
- Net profit from a sole proprietorship;
- Qualifying self-employment income reported through a partnership; and
- Certain nontaxable combat pay when the applicable election is made.
Earned income generally does not include:
- Interest;
- Dividends;
- Capital gains;
- Pensions;
- Annuities;
- Rental income that is not earned income;
- Social Security benefits; or
- Other passive investment income.
Income excluded under an income-tax treaty is also excluded from the earned-income calculation on Schedule 8812.
The calculation may be more complicated for taxpayers with self-employment income, business losses, clergy income, or certain Schedule K-1 income. The Schedule 8812 Earned Income Worksheet determines the amount that belongs on line 18a.
How Does the ACTC Work With Three or More Qualifying Children?
Taxpayers with three or more qualifying children may be eligible for an alternative ACTC calculation.
Schedule 8812 first calculates 15% of earned income above $2,500. It may then compare that amount with an alternative calculation based largely on:
- Social Security tax withheld;
- Medicare tax withheld;
- Additional Medicare Tax;
- Certain self-employment taxes; and
- Tier 1 Railroad Retirement Tax Act taxes.
The alternative amount is reduced by the Earned Income Credit and certain other amounts included in the Schedule 8812 calculation.
The larger of the standard earned-income calculation and the alternative calculation may be used. The resulting ACTC remains limited by:
- The unused Child Tax Credit; and
- The maximum of $1,700 per qualifying child.
Taxpayers should complete Part II-B of Schedule 8812 rather than assuming that the standard 15% formula produces the final result.
Does Filing Form 2555 Prevent an Expat From Claiming the ACTC?
A taxpayer who files Form 2555 cannot claim the Additional Child Tax Credit.
This is a complete prohibition. Filing Form 2555 does not merely reduce the amount of earned income available for the ACTC calculation.
The prohibition applies when Form 2555 is used to claim:
- The Foreign Earned Income Exclusion;
- The foreign housing exclusion; or
- The foreign housing deduction.
It also applies when only part of the taxpayer’s foreign earned income is excluded.
The 2025 Schedule 8812 states directly that a taxpayer who files Form 2555 cannot claim the ACTC. The Form 2555 instructions separately confirm that taxpayers claiming either foreign earned income exclusion or the housing deduction cannot take the ACTC.
Our guides explain the Foreign Earned Income Exclusion and Form 2555 in more detail.
Can the Foreign Tax Credit Preserve ACTC Eligibility?
Using the Foreign Tax Credit may preserve ACTC eligibility because the FTC reduces U.S. income tax without excluding the taxpayer’s foreign earnings.
An expat relying on the FTC generally:
- Reports the full amount of foreign income on Form 1040;
- Does not file Form 2555;
- Keeps qualifying foreign wages or self-employment income in the ACTC earned-income calculation; and
- Claims a credit for qualifying foreign income taxes, usually through Form 1116.
The FTC may reduce the taxpayer’s U.S. income-tax liability, leaving more of the Child Tax Credit potentially available for the refundable ACTC calculation.
However, using the FTC does not guarantee an ACTC refund. The final amount still depends on:
- Qualifying earned income;
- The unused Child Tax Credit;
- The $1,700-per-child limit;
- The number of qualifying children;
- The Foreign Tax Credit limitation;
- The income phaseout;
- The taxpayer and child SSN requirements; and
- The complete Schedule 8812 calculation.
Our Form 1116 and Foreign Tax Credit guide explains which foreign taxes qualify and how the credit is calculated.
Can an Expat Claim Both the FEIE and the ACTC?
An expat cannot claim the ACTC on a return that includes Form 2555.
Using the Foreign Tax Credit on income above the FEIE limit does not restore ACTC eligibility if the taxpayer also files Form 2555.
An expat may sometimes use the FEIE and FTC on different portions of foreign income. However, the presence of Form 2555 on the return still prevents the ACTC.
Foreign taxes attributable to income excluded under the FEIE also cannot be claimed as a Foreign Tax Credit. When only part of the income is excluded, the related foreign taxes must be allocated between excluded and non excluded income.
How Can the FEIE and FTC Produce Different ACTC Results?
The method used to prevent double taxation can determine whether an expat receives a refundable ACTC.
Assume a U.S. citizen living in Canada has:
- $50,000 of employment income;
- One qualifying child; and
- Enough qualifying Canadian income tax to offset the corresponding U.S. income tax.
What Happens If the Taxpayer Claims the FEIE?
The taxpayer files Form 2555 and excludes the $50,000 of Canadian wages.
Because the return includes Form 2555, the taxpayer cannot claim the ACTC. This remains true even if the earned-income formula would otherwise produce a refundable credit.
What Happens If the Taxpayer Claims the FTC?
The taxpayer reports the full $50,000 of Canadian wages and claims a Foreign Tax Credit for qualifying Canadian income taxes.
The wages remain available for the standard ACTC calculation:
$50,000 − $2,500 = $47,500
$47,500 × 15% = $7,125
The earned-income formula produces $7,125, but the ACTC is limited to $1,700 for one qualifying child.
If the FTC offsets the applicable U.S. income tax and all other requirements are satisfied, the taxpayer may qualify for a $1,700 ACTC refund.
This is a simplified example. The actual result depends on the taxpayer’s deductions, foreign taxes, filing status, other credits, previous FEIE elections, and complete Schedule 8812 calculation.
Should an Expat Switch From the FEIE to the FTC?
An expat should compare the complete current-year and long-term tax consequences before switching from the FEIE to the FTC.
Using the FTC may produce a better result when:
- The taxpayer has one or more qualifying children;
- The taxpayer has enough earned income to produce an ACTC;
- The country of residence imposes enough qualifying income tax to offset the U.S. tax;
- The taxpayer meets all the remaining CTC and ACTC requirements; and
- The expected ACTC exceeds any additional U.S. tax or other cost caused by giving up the FEIE.
Switching may produce a worse result when the taxpayer lives in a low-tax or tax-free country. Without enough qualifying Foreign Tax Credits, giving up the FEIE could create a U.S. tax liability larger than the expected ACTC refund.
Self-employed expats must also consider U.S. self-employment tax. Neither the FEIE nor the regular FTC generally eliminates self-employment tax.
Our guide to Social Security and self-employment tax for expats explains when a totalization agreement may provide an exemption.
What Is the Five-Year FEIE Revocation Rule?
If switching methods requires the taxpayer to revoke an existing FEIE election, the decision may affect future tax returns.
After revoking the FEIE election, the taxpayer generally cannot claim the exclusion again for the following five tax years without IRS approval.
The Form 2555 instructions confirm that an FEIE election remains effective until revoked and explain the five-year restriction.
Our comparison of the Foreign Earned Income Exclusion and Foreign Tax Credit discusses the wider differences between the two methods.
How Does an Expat Claim the ACTC?
An expat claims the ACTC by filing a U.S. federal income-tax return and completing Schedule 8812.
The basic process is:
- File Form 1040 and report worldwide income.
- Claim each qualifying child in the dependents section.
- Complete Schedule 8812.
- Complete Form 1116 when required to claim the Foreign Tax Credit.
- Enter the ACTC from Schedule 8812 on Form 1040, line 28.
A return claiming the ACTC cannot include Form 2555.
The taxpayer and each qualifying child must meet the applicable Social Security Number requirements. The child must also satisfy all the qualifying-child tests.
Those general eligibility rules are covered in our Child Tax Credit guide for expats.
Can an Expat Claim the ACTC for a Previous Year?
An expat who omitted the ACTC from a previously filed return may be able to claim it by filing Form 1040-X.
The taxpayer must qualify under the rules that applied to the year being amended. Credit amounts, earned-income requirements, and identification rules can differ by tax year.
The 2025 requirement that the required SSNs be issued by the return’s due date, including extensions, also applies to an amended 2025 return. Obtaining an SSN after that deadline generally does not retroactively establish eligibility.
A refund claim is generally subject to the applicable statute of limitations. Read our guide to correcting a tax return after filing before amending a previous return.
If Form 2555 is preventing you from receiving the ACTC, 1040 Abroad can compare your return under the FEIE and Foreign Tax Credit methods. We calculate the potential refund, any resulting U.S. tax, and the effect of revoking an existing FEIE election before recommending a change.
This comparison is especially important for expats with qualifying children who live in countries with income taxes high enough to offset their U.S. liability. Contact 1040 Abroad to determine whether claiming the ACTC is possible and whether changing methods would improve your overall tax result.
