SUMMARY OF CHILD TAX CREDIT 2010

As U.S citizens living in Israel you can generally benefit from the additional child tax credit because in most cases, taxes paid to Israel can offset your U.S. tax liability. This REFUNDABLE credit can be worth up to $1,000 per child and can be received by you in the form of a U.S. Treasury check or directly deposited into your U.S. bank account.

Some particulars of the law are as follows:

Dependents

Must be age 16 or under.
Must be U.S. citizens or resident aliens. If NATURALIZED U.S. Citizens thru grand-parent, you may only claim them from the year of naturalization.
Must have a Social Security Number.

Income

Income must be earned from wages or self-employment.
In general, you must have earned income of about $3,000 (in 2009), $8,500 (in 2008) to 11,750 (2007 and earlier) per year to qualify. You begin to qualify for the credit if you've earned above $3,000 (in 2009), $8,500 (in 2008) to 11,750 (previous years), and can potentially receive a maximum of up to 15% above this amount.
The credit starts to be limited when the Adjusted Gross Income is over $110,000 for married taxpayers, and lower amounts for single, married filing separate or head of household filing status.

Non-Resident Alien spouses of U.S. citizens can generally elect to be treated as Resident Aliens and file a joint return in order to combine their incomes.
A refund is received only if a tax return is filed. All income must be reported. This is not an automatic request for $1,000 per child.
For those who have been filing returns and have been using the now $91,400 per year Foreign Earned Income Exclusion, you would have to revoke the exclusion in order to claim the additional child tax credit. If both spouses have earned income, only one can revoke, while the other can continue to exclude his wages. The revocation is effective for 5 years, and can only be reinstated with written permission from the Internal Revenue Service. A tax advisor should be consulted before making this revocation.
Refunds can be claimed up to 3 years from the due date of the original return. For example, a taxpayer can claim a refund for 2006 until April 15, 2010.

There are other variables that might limit/reduce the Additional Child Tax Credit refund, such as self-employment tax on self-employment earnings, large U.S. source passive income (interest, dividends, capital gains, rentals, etc.), alternative minimum tax, amount of foreign tax paid, etc. A tax advisor should be consulted regarding these matters.

When organizing your data for tax return preparation, it is essential to have the following:

Social Security Numbers and copies of cards for all family members.
Year-end wage statements forms from your employer (Form(s) 106 in Israel).
If self-employed your Income/Loss statement from your Israeli tax return.
Statements of interest, dividends, capital gains, rental income, pensions and other income that you have received from U.S and Israeli sources.
Amounts of foreign tax paid on your income.

See our "What We Need" Tab for a full list.

Please contact our office anytime for further information or if you have any questions.