5 Great Tax Tips for Expat Parents

Personal Finance Travel

As taxpaying parents, you’re hopefully familiar with some of the basic mechanisms that the U.S. government offers to ease the financial strain of raising a family—for instance, the dependent exemption, the child tax credit, and the 529 college saving plan.

If you’re a U.S. expat raising a family abroad, however, your tax return may involve some extra layers of complexity. Understanding how tax breaks work in an international context is the best way to maximize your tax savings. As you enter the 2017 filing season, here are 5 tips to consider:

1. Maximizing the Child Tax Credit

For expat tax filers, there are two main tax mechanisms designed to prevent double taxation—taxation in the U.S. and your country of residence. The first is the foreign earned income exclusion (FEIE) which allows expats to exclude a certain amount of income earned abroad ($101,300 for the 2016 tax year). The second is the foreign tax credit (FTC) which allows expats to use paid foreign taxes as a credit against their U.S. tax obligation. These mechanisms can reduce or even eliminate the U.S. federal income tax that would otherwise be due by you.

While there are advantages to both methods depending on your particular situation, the clear winner for expat parents is the foreign tax credit. According to recently enacted legislation, taxpayers who utilize the FEIE cannot claim the additional child tax credit (the portion of the credit that exceeds your tax liability), which is refundable up to $1,000 per child. This limitation does not apply, however, when the foreign tax credit is utilized. Thus, assuming that your creditable foreign tax exceeds your U.S. tax, reducing your tax via the FTC is the smarter choice.

2. Utilizing the College Tax Credit

For parents of college students, the American Opportunity Tax Credit (AOTC) offers a credit of up to $2,500 per eligible student for whom you pay tuition expenses. A 40% portion of the credit (up to $1,000) is potentially refundable.

If you’re an expat parent, you may not know that the AOTC is available for tuition paid not only to eligible American institutions but also to eligible foreign universities. If the university is on the list of institutions eligible to participate in a student aid program administered by the U.S. Department of Education, then it is generally an eligible university for purposes of the AOTC. The current list includes hundreds of foreign institutions located across the globe.

3. Appling for Tax Identification Numbers Early

Under a new law, parents cannot file an amended return to claim the child tax credit or AOTC for prior years that a qualifying child did not have an Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN). The credits will be disallowed unless the number was issued on or before the due of the tax return. As such, new taxpayer numbers should be applied for as soon as allowable to avoid losing tax benefits later on.

4. Participating in a 529 Savings Plan

A 529 savings plan gives parents the opportunity to make contributions to a special account dedicated to their children’s higher education expenses. While contributions to the plan are not tax deductible, plan investment earnings accumulate tax-free (for U.S. reporting purposes) until university costs are paid from the funds. Distributions from qualified universities are tax-free if the funds are used to pay for qualified education expenses, such as tuition, room and board, and textbooks.

Similar to the AOTC, a 529 savings plan is available not only for American institutions but for eligible foreign universities, as well. If the university is on the list of institutions eligible to participate in a student aid program administered by the U.S. Department of Education, then it is generally an eligible university for purposes of the 529 savings plan.

Keep in mind, however, that there are currently no U.S. tax treaties that recognize the tax-advantaged status of a 529 savings plan. Therefore, the tax advantages of the plan could be greatly diminished by virtue of the funds being subject to current taxation under relevant foreign tax law in the country in which expat parents live.

5. Filing International Tax Forms

As a general rule, children have the same obligation to file a U.S. income tax return as adults. The income threshold rules are somewhat different, but the filing obligation is otherwise generally the same.

What expat parents may not realize is that international forms apply to children as well. This may be particularly relevant with respect to Foreign Bank and Financial Accounts (FBAR). The associated IRS form reports financial interests in or signature authority over foreign bank accounts if the maximum values of the accounts exceed $10,000 in the aggregate at any time during the calendar year.

While maintaining joint accounts with kids or granting them signatory authority over bank accounts is not that common in the U.S., parents abroad often use this a means to minimize local inheritance taxes, transfer taxes, or other local taxes.

As an expat parent, you should consider whether banking activities involving your child triggers an obligation to file the FBAR form or other international tax forms, such as IRS Form 8938. Keep in mind that if your children cannot file or sign their own FBAR for any reason, then you must do so on the their behalf.

After spending the majority of their respective careers at two of the largest accounting firms (PwC and Ernst & Young), Joshua Ashman (jashman@expattaxprofessionals.com) and Ephraim Moss (emoss@expattaxprofessionals.com) founded Expat Tax Professionals, a firm specializing in the needs of U.S. citizens living abroad. You can visit the firm’s website at www.expattaxprofessionals.com.


  1. I together with my buddies were found to be taking note of the good key points located on the blog and so quickly developed a horrible feeling I never expressed respect to the blog owner for those secrets. My women ended up so glad to see them and now have seriously been making the most of those things. We appreciate you really being well thoughtful and then for utilizing such tremendous things millions of individuals are really wanting to learn about. My sincere regret for not saying thanks to you earlier.

  2. Thank you for every one of your labor on this blog. My mum take interest in working on investigations and it’s simple to grasp why. A number of us learn all of the dynamic medium you present powerful guidelines by means of the website and in addition increase participation from other individuals on the matter and our favorite child is undoubtedly becoming educated so much. Take pleasure in the remaining portion of the year. You’re the one carrying out a brilliant job.

  3. I wanted to construct a brief word so as to thank you for these amazing recommendations you are showing on this website. My prolonged internet look up has at the end been recognized with beneficial strategies to share with my companions. I would claim that most of us site visitors actually are unequivocally lucky to live in a remarkable network with so many awesome individuals with insightful hints. I feel rather lucky to have come across your web page and look forward to really more cool times reading here. Thank you again for a lot of things.

  4. I would like to voice my affection for your kind-heartedness supporting men and women who require guidance on this theme. Your special commitment to getting the message across ended up being quite valuable and has continuously enabled individuals like me to reach their desired goals. Your insightful recommendations implies so much to me and extremely more to my colleagues. Many thanks; from each one of us.

  5. I and also my friends came checking the excellent ideas from your website while before long came up with a horrible suspicion I never thanked you for those secrets. The boys were definitely stimulated to read through all of them and already have actually been enjoying these things. Thank you for indeed being very kind and then for getting this sort of very good subject areas millions of individuals are really desperate to be aware of. My honest regret for not expressing appreciation to earlier.

  6. I really wanted to send a quick remark to appreciate you for the pleasant pointers you are placing on this website. My rather long internet search has at the end been recognized with professional facts and techniques to talk about with my visitors. I would say that most of us visitors are unquestionably endowed to dwell in a remarkable network with many perfect professionals with useful methods. I feel very grateful to have used your web pages and look forward to plenty of more entertaining times reading here. Thanks once again for all the details.

  7. I must express appreciation to you just for rescuing me from such a instance. Just after looking through the online world and getting methods which were not beneficial, I figured my life was done. Being alive minus the answers to the problems you have fixed as a result of your entire short post is a critical case, as well as ones that would have in a wrong way damaged my career if I hadn’t come across your web site. Your personal natural talent and kindness in dealing with the whole lot was important. I’m not sure what I would’ve done if I had not come across such a stuff like this. I am able to at this point look ahead to my future. Thanks for your time very much for your specialized and effective help. I won’t think twice to propose your web sites to any individual who desires assistance about this problem.

  8. I want to show my appreciation for your kind-heartedness in support of women who must have assistance with that concern. Your real commitment to passing the message all around had become remarkably valuable and have continually made others much like me to achieve their goals. Your entire warm and friendly hints and tips implies a lot a person like me and somewhat more to my mates. Thanks a lot; from everyone of us.

  9. I wish to show my passion for your kind-heartedness for folks who need guidance on that area of interest. Your special dedication to getting the solution all through has been especially helpful and have regularly allowed somebody like me to realize their goals. The important guide can mean a lot to me and much more to my mates. Many thanks; from everyone of us.

  10. I wanted to compose a small word to be able to say thanks to you for the fantastic information you are showing here. My long internet search has at the end of the day been rewarded with high-quality ideas to talk about with my family members. I ‘d assume that we readers are really blessed to exist in a wonderful network with so many outstanding professionals with great plans. I feel quite blessed to have used your entire webpages and look forward to plenty of more brilliant moments reading here. Thank you once more for all the details.

  11. I simply wanted to send a quick word to be able to express gratitude to you for those precious tips you are placing here. My time-consuming internet search has at the end of the day been paid with pleasant content to share with my friends and family. I ‘d point out that we site visitors are unequivocally lucky to exist in a notable website with so many marvellous people with good solutions. I feel truly fortunate to have encountered the website and look forward to really more entertaining moments reading here. Thanks again for a lot of things.

  12. I needed to create you one very small word in order to thank you very much as before for your personal spectacular guidelines you’ve discussed on this site. This has been quite seriously generous of people like you to grant unreservedly all numerous people might have made available as an e-book to end up making some profit for themselves, precisely now that you might have done it in the event you wanted. The concepts likewise served to become fantastic way to realize that someone else have a similar fervor similar to my very own to see lots more when considering this condition. I know there are many more pleasurable instances up front for folks who go through your website.

  13. As I site possessor I believe the content material here is rattling excellent , appreciate it for your hard
    work. You should keep it up forever! Good Luck.

  14. I needed to write you the bit of word just to thank you again for all the marvelous basics you’ve shared at this time. It was really extremely open-handed of you to make freely precisely what numerous people might have made available as an e book to earn some money for themselves, even more so considering the fact that you could possibly have done it in the event you considered necessary. These basics likewise served as the great way to be sure that other people have the same dream really like my very own to learn much more when it comes to this condition. I believe there are several more pleasurable sessions up front for many who looked over your blog.

  15. Hi there! Someone in my Facebook group shared this
    website with us so I came to take a look. I’m definitely enjoying the information. I’m
    bookmarking and will be tweeting this to my followers! Fantastic blog and brilliant
    style and design.

  16. As I web-site possessor I believe the content material here is rattling great
    , appreciate it for your efforts. You should keep it up forever!
    Best of luck.

  17. I was just seeking this info for a while.

    After six hours of continuous Googleing, at last I got
    it in your web site. I wonder what’s the lack of Google strategy that don’t rank this kind of informative sites in top of
    the list. Usually the top web sites are full of garbage.

  18. As I website possessor I believe the content matter
    here is rattling excellent , appreciate it for your hard work.
    You should keep it up forever! Best of luck.

  19. I really like what you guys are up too. Such clever work
    and exposure! Keep up the excellent works guys I’ve you guys
    to our blogroll.

  20. I got what you intend,saved to fav, very nice website.