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You moved to Germany with your family three years ago. Two children born in Berlin. Your spouse is German. You work for a German company. Your kids attend German schools. You pay German taxes. Life is fully established abroad.
Then the US tax season arrives. You know you need to file, but now you have questions. Do your German-born children need Social Security numbers? Can you claim them as dependents? What about the child tax credit—does it apply when living abroad? And your German spouse who's never lived in the US—do they file too?
Having children abroad creates layers of US tax complexity most domestic filers never face. You must obtain Social Security numbers for foreign-born children, decide whether your non-citizen spouse should file jointly, determine which filing status maximizes credits and deductions, report children's foreign accounts on FBAR and potentially Form 8938, claim (or lose) child tax credit and Additional tax benefits, navigate dependent rules when children aren't living in the US, and coordinate US tax benefits with foreign benefits you receive. Understanding the Foreign Tax Credit helps minimize your overall tax burden.
In this article you'll learn exactly how to file US taxes as an expat family with children for 2025, which tax benefits you can claim, and how to avoid common mistakes that cost expat families thousands in lost credits and penalties.
Do my children need Social Security numbers if born abroad?
Understanding SSN requirements for foreign-born children prevents penalties and enables proper tax filing, especially when claiming the child tax credit.
All US citizen children must have Social Security numbers by the time they're listed as dependents on your tax return. This applies whether born in the US or abroad.
Your child is a US citizen if: Born in the US, born abroad to at least one US citizen parent (you must file Consular Report of Birth Abroad), born abroad and you've taken steps to claim citizenship for them, or naturalized as a US citizen.
Penalty for filing without SSN: $50 per dependent per tax return filed without valid SSN or ITIN. If you file 5 years without SSN for your child: $250 penalty ($50 × 5 years).
When to get SSN: Best practice is obtaining SSN immediately after birth or as soon as citizenship is established. You can file returns without it temporarily, but penalties accrue.
How to get Social Security number for child born abroad
Step 1: Establish US citizenship at US Embassy/Consulate
- File Consular Report of Birth Abroad (CRBA) - Form DS-2029
- Submit proof of your US citizenship (passport, birth certificate)
- Submit proof of child's birth (foreign birth certificate)
- Provide marriage certificate and proof of residence
- Child receives Consular Report of Birth Abroad and US passport
Step 2: Apply for Social Security number
- Complete SS-5 (Application for Social Security Card)
- Can apply at US Embassy/Consulate during CRBA process
- Or apply after returning to US on visit
- Typically takes 2-4 weeks for SSN card to arrive at US address
Alternative: ITIN (Individual Taxpayer Identification Number)
- Use Form W-7 if child cannot get SSN easily
- ITINs can be used for tax filing but have limitations
- SSN preferred for US citizen children to claim child tax credit
Timing tip: Apply for CRBA and SSN at same time during consular appointment. Most US Embassies handle both simultaneously.
Children with only ITIN
If you previously filed using ITIN for your child and later obtain SSN, inform IRS:
- File return with SSN in current year
- IRS will merge records
- Future filings use SSN only
- Old ITIN becomes inactive
Should my non-US citizen spouse file with me?
Deciding filing status when married to a non-citizen spouse significantly affects your tax bill and ability to claim the big beautiful child tax credit enacted in 2025.
Option 1: Married Filing Jointly (MFJ) - Treat non-citizen spouse as US resident for tax purposes. Both spouses file one return together, reporting combined worldwide income. Non-citizen spouses get SSN or ITIN. Both spouses sign return.
Option 2: Married Filing Separately (MFS) - File your return alone showing your worldwide income only. Non-citizen spouses don't file US returns (unless has US income). You can't claim a spouse as dependent. More limited deductions and credits.
Option 3: Head of Household (HOH) - Available only if you meet special requirements: married to non-resident alien, you're considered "unmarried" for tax purposes, maintain household for qualifying dependent child who lived with you more than half the year, and you pay more than half household costs.
Married Filing Jointly vs. Married Filing Separately
|
Factor |
Married Filing Jointly |
Married Filing Separately |
|
Standard Deduction (2025) |
$30,000 |
$15,000 each |
|
Child Tax Credit |
$2,000 per child |
Limited or none |
|
Earned Income Tax Credit |
Available if qualify |
Not available |
|
Foreign Tax Credit |
Full FTC available |
Complex allocation |
|
Foreign Earned Income Exclusion |
$130,000 each spouse |
$130,000 each spouse |
|
Complexity |
Report spouse's worldwide income |
Simpler, only your income |
|
Spouse's privacy |
Exposes spouse to IRS |
Protects spouse's information |
When MFJ makes sense: Spouses have little or no income, combined income creates a lower tax bracket, you want child tax credit and other family credits, or you want to maximize standard deduction.
When MFS makes sense: Spouse has high foreign income heavily taxed abroad (FTC complications), spouse doesn't want IRS access to their worldwide finances, you're separating/divorcing, or spouse has tax issues in foreign country.
Making the election
To file jointly with non-resident alien spouse:
- Both sign Form 1040
- Include statement: "Both spouses elect to be treated as US residents for tax purposes"
- Attach to first joint return
- Election remains in effect until revoked
- Spouse needs SSN or ITIN (apply using Form W-7 if needed)
Can I claim my children as dependents while living abroad?
Dependent rules apply to expat children with some special considerations. Proper dependent claims are essential for maximizing the big beautiful bill child tax credit and other family benefits.
Qualifying child requirements
Your child qualifies as dependent if they meet all tests:
Relationship: Son, daughter, stepchild, foster child, adopted child, sibling, step-sibling, or descendant of any (grandchild, niece, nephew).
Age: Under 19 at end of year, OR under 24 if full-time student, OR any age if permanently disabled.
Residency: Lived with you more than half the year. Exception for expats: If a child lives abroad with you permanently, they meet residency test. Temporary absences (boarding school, camp, hospital) count as living with you.
Support: Children didn't provide more than half their own support during the year.
Citizenship/Residency: Child must be a US citizen, US national, US resident alien, or resident of Canada or Mexico for some part of the year.
Joint return: Child didn't file joint return unless only filing to claim refund (no tax liability).
Special situations for expat families
Child born abroad: If both parents are US citizens or one parent is a US citizen who meets residency requirements, the child is a US citizen and qualifies as dependent. Must obtain SSN or ITIN to claim.
Child living abroad with you: Meets residency test if living in same household abroad. Foreign school attendance doesn't disqualify.
Child in boarding school: If you maintain a household abroad where the child lives when not at school, and school is a temporary absence, child meets residency test.
Split custody post-divorce: If parents live in different countries, the custodial parent (child lives with over half the year) claims the child. Custodial parents can release claims to non-custodial parents using Form 8332.
Non-citizen child: Foreign-born child of non-citizen spouse doesn't qualify as dependent unless the child is a US citizen, resident alien, or resident of Canada/Mexico. A German child who's never been to the US and not a US citizen doesn't qualify.
What tax credits can I claim for children living abroad?
Several valuable credits apply to expat families with qualifying children. Recent legislation including the big beautiful bill child tax credit provisions significantly increased benefits for families.
Child Tax Credit (CTC)
Amount: $2,200 per qualifying child under age 17.
Qualifying child requirements: US citizen, US national, or US resident alien child, under age 17 at end of tax year, your dependent qualifying under dependency tests, has Social Security number (not ITIN), and lived with you more than half the year (foreign residence counts).
Income phase-out: Credit begins phasing out at $400,000 for married filing jointly ($200,000 for other statuses). Reduces $50 for every $1,000 of income above threshold.
Refundable portion (Additional Child Tax Credit): Up to $1,700 per child (2025) is refundable if you have earned income over $2,500. The refundable amount is less than $1,700 or 15% of earned income above $2,500.
Example: Two children, $80,000 earned income, both qualify.
- Total Child Tax Credit: $4,400 ($2,200 × 2)
- Refundable amount: Lesser of $3,400 ($1,700 × 2) or 15% × ($80,000 - $2,500) = $11,625
- Refundable portion: $3,400 (full amount refundable)
- If your tax bill is $0 after FEIE, you receive $3,400 refund
Critical for expats: CTC requires SSN. ITIN doesn't qualify. Get SSN for foreign-born children to claim the irs child tax credit.
Child and Dependent Care Credit
Amount: Up to $3000 for one child or $6000 for two or more children in 2025.
Requirements: Pay for care so you (and spouse if married) can work or look for work, care is for qualifying child under 13 or disabled dependent, you report care provider's information (name, address, tax ID), and care is not provided by your spouse or child under 19.
Limitation for expats: Care must be provided in the US or by a US provider in most cases. Foreign daycare or nanny typically doesn't qualify unless the provider has a US tax ID.
Practical reality: Most expat families can't use the Child and Dependent Care Credit because foreign childcare providers don't have US tax IDs.
Credit for Other Dependents (ODC)
Amount: $500 per qualifying dependent who doesn't qualify for Child Tax Credit.
Who qualifies: Dependents age 17-18, dependents over 18 who are full-time students under 24, other qualifying relatives, dependents without SSN (have ITIN).
Example: 17-year-old child (too old for CTC) or 23-year-old college student qualifies for $500 ODC.
Earned Income Tax Credit (EITC)
Amounts for 2025: Up to $8,046 with 3+ qualifying children, $7,152 with 2 children, $4,328 with 1 child, $649 with no children.
Requirements: Must have earned income, income under limits ($67,340 married filing jointly with 3+ children for 2025), must file jointly if married, qualifying children must meet all tests.
Expat limitation: Foreign Earned Income Exclusion reduces or eliminates EITC. If you exclude all foreign income under FEIE, you have $0 "earned income" for EITC purposes, disqualifying you.
Strategy: Some lower-income expats choose not to claim FEIE to preserve EITC eligibility if EITC provides more benefit than FEIE tax savings.
Do I need to report my children's foreign bank accounts?
Yes, children's foreign accounts must be reported on FBAR and possibly Form 8938. Understanding these requirements is separate from claiming the child care tax credit but equally important for compliance.
FBAR requirements for children's accounts
When parents must report children's accounts on their FBAR: Parent has signature authority over child's account (can withdraw, transfer, etc.), parent has financial interest (owns account or shares ownership), OR child is minor and parent has legal authority over account.
Aggregate $10,000 threshold: Combine parent's accounts plus children's accounts. If the total exceeds $10,000 at any time during the year, the parent files FBAR reporting all accounts.
Example: A parent has $7,000 in a UK account. Two children each have £1,500 ($2,000 each) in custodial accounts. Total: $11,000 exceeds threshold. Parent files FBAR reporting all three accounts.
How to report: Include a child's account on your FBAR. Check box 14-15 indicating you have signature authority or financial interest. Report maximum balance during the year.
Form 8938 for children's accounts
Higher thresholds: Form 8938 thresholds are much higher than FBAR. For expats: $200,000 (single) or $400,000 (married) on the last day of year, OR $300,000 (single) or $600,000 (married) at any time during the year.
When to include children's assets: If parent has financial interest or signature authority over child's foreign accounts and combined assets (parent + children) exceed thresholds, report on parent's Form 8938.
Practical reality: Most expat families with typical children's savings accounts don't reach Form 8938 thresholds but do meet FBAR $10,000 threshold.
Children filing their own returns
If a child has sufficient income requiring tax return (typically $1,300+ unearned income for dependent child), child may need to file own return and own FBAR if they have foreign accounts over $10,000.
Kiddie Tax: Unearned income over $2,600 (2025) for children under 19 (or under 24 if full-time student) is taxed at the parent's marginal rate.
What happens if my child has US income?
Foreign-resident children with US income face special filing requirements. This is separate from the parent's ability to claim the irs child tax credit for the child as a dependent.
Types of US income for expat children
Investment income: Dividends, interest, capital gains from US investments (529 plans, custodial accounts, inheritance).
Employment income: Summer jobs in the US, online work for US companies.
Trust income: Distributions from US trusts.
Rental income: Inherited share of US rental property.
When child must file own return
File separate return for child if gross income exceeds filing thresholds:
Dependent child filing thresholds (2025):
- Unearned income over $1,300
- Earned income over $15,000
- Gross income more than the larger of $1,300 or earned income (up to $14,600) plus $450
If a child only has interest and dividends under $13,000, parents can elect to report the child's income on their return using Form 8814.
Benefits: Simpler - avoid filing separate child's return, only one SSN needed.
Drawbacks: Child's income taxed at parents' rates (higher), increases parents' AGI affecting phase-outs.
How can I maximize tax benefits using Foreign Tax Credit and exclusions?
Understanding how to coordinate the Foreign Tax Credit, FEIE, and Foreign Housing Exclusion is essential for minimizing your overall tax burden while claiming family credits.
Foreign Earned Income Exclusion (FEIE)
Amount: $130,000 per person for 2025.
How it works: Exclude foreign-earned income (wages, salaries, self-employment) from US taxation if you meet the Physical Presence Test (330+ days abroad in 12 months) or Bona Fide Residence Test (foreign resident for full tax year).
Family benefit: If both spouses qualify, exclude up to $260,000 combined ($130,000 each). This dramatically reduces taxable income, potentially creating $0 tax liability before claiming child tax credit refunds.
Foreign Housing Exclusion
How it works: Exclude certain housing costs above base amount ($20,800 for 2025). Qualifying costs include rent, utilities (except telephone), real and personal property insurance, residential parking, and furniture rental.
Maximum exclusion: Varies by location. High-cost areas (London, Tokyo, Paris) have higher limits—up to $50,000+ in some cities.
Family benefit: Reduces taxable income further beyond FEIE, increasing likelihood of $0 tax bill and full refundable child care tax credit eligibility.
Foreign Tax Credit (FTC)
How it works: Dollar-for-dollar credit for foreign income taxes paid on income not excluded by FEIE.
When to use: For income exceeding FEIE limit ($130,000+), passive income (dividends, interest, capital gains), or when foreign tax rate exceeds US rate.
Coordination with family credits: Properly structuring Foreign Tax Credit claims ensures you preserve eligibility for big beautiful bill child tax credit and other family benefits while avoiding double taxation.
How NSKT Global Can Help Expat Families
NSKT Global specializes in tax preparation for American families living abroad, maximizing credits like the big beautiful bill child tax credit and ensuring compliance.
We provide complete family tax return preparation including Form 1040 with optimal filing status (MFJ, HOH, or MFS analysis), claiming all eligible child credits, Form 2555 for both parents if applicable ($130,000 exclusion each), Form 1116 for Foreign Tax Credit coordination, proper Foreign Housing Exclusion calculations, and proper dependent reporting meeting all IRS requirements.
We provide family tax optimization strategies including determining optimal way to claim dependents in multi-country situations, coordinating US credits like child tax credit with foreign family benefits you receive, maximizing Foreign Tax Credit and Foreign Housing Exclusion benefits, advising on custody situations affecting dependent claims, and planning multi-year strategies for families expecting to return to US.
Whether your family just moved abroad or has lived internationally for years, our expertise ensures you claim every credit you're entitled to—including the full one big beautiful bill child tax credit—while meeting all IRS requirements.
Frequently Asked Questions
Q: Can I claim the Child Tax Credit if my children were born abroad?
Yes, as long as your children are US citizens (through you), have Social Security numbers (not ITINs), are under 17, and meet other qualifying tests. The child tax credit applies regardless of where children were born or currently live. Foreign residence doesn't disqualify them.
Q: What is the "big beautiful bill" and how does it affect my child tax credit?
The One Big Beautiful Bill Act (OBBBA) signed in July 2025 made permanent the increased estate tax exemption and changed the child tax credit amounts. The big beautiful bill child tax credit is now at $2,200 per child under 17, with a $1,700 refundable portion. However, permanent estate exemptions ($15M+) benefit family wealth transfer planning.
Q: Do I lose the Child Tax Credit if I claim Foreign Earned Income Exclusion?
No. You can claim both FEIE and child tax credit. FEIE reduces your taxable income (potentially to $0), but the refundable portion of child tax credit ($1,700 per child) can still generate a refund if you have earned income over $2,500. This combination is highly beneficial for expat families.
Q: Can I claim the Child and Dependent Care Credit for foreign daycare?
Usually no. The Child and Dependent Care Credit typically requires a care provider to have a US tax ID (SSN or EIN). Foreign daycare centers and nannies generally don't have these, making the credit unavailable to most expat families. However, child tax credit and IRS child tax credit benefits remain available.
Q: Should my non-citizen spouse file jointly to maximize our child tax credit?
Often yes. Married Filing Jointly provides full child tax credit ($2,000 per child), higher standard deduction ($30,000), and better overall tax rates. However, it requires reporting a spouse's worldwide income. Run the numbers comparing MFJ vs. MFS to see which maximizes your big beautiful bill child tax credit and overall tax savings.
