Israeli Americans to benefit from enlarged child credit, worth an extra $400 per kid


The new US tax-reform legislation includes some changes which promise to be very beneficial for US citizens living in Israel.

There will be more people eligible for the Child Tax Credit Refund and those who were eligible before will likely get even more back.

Known as the Tax Cuts & Jobs Act, the reform makes several changes to the favorited Child Tax Credit which are likely to translate to more money in your pocket.

The refundable credit has been increased from $1,000 to $1,400 per child up to age 17, and another $600 per child which isn’t refundable. This means that a taxpayer with five kids who was eligible to receive $5,000 will now get a refund of $7,000.

The IRS has also increased the phase-out threshold to $400,000 for married taxpayers filing jointly, and $200,000 for any individual filers. This will allow those with higher incomes to now be eligible for the tax refund.

The last change is that in the past people with lower income levels who had less than $3,000 salary for the year were not eligible for the refund at all. That number has now changed to $2,500. This means that lower wage earners will be receiving more as well.

The result of these changes is that more people living in Israel will be seeing refunds than would have in past years. It is important to note, however, that this change only goes into effect for the 2018 tax filing deadline.

Working mothers

Other big winners from this change are working mothers. Very often working mothers pay less tax in Israel than they would owe the US, forcing them to use the Foreign Income Exclusion, thus forfeiting their tax credit. With this change, they will have more to offset any tax due and still be eligible to receive a tax refund.

The child tax credit was originally made famous a number of years back when legislators instituted a tax credit to help families with young kids pay less tax. What the US did not anticipate is that a number of American families in Israel would have a higher number of kids, smaller incomes, and higher taxes than the average American family. Those differences have created a large Israeli population that receive annual “kitzbat yeladim” for their children under the age of 17. And now they will earn even more.

This post was written together with Yaacov Jacob, manager of the Individual & Partnership Department at Philip Stein & Associates.

About the Author
Philip is president and founder of Philip Stein & Associates, the largest US accounting firm in Israel, specializing in US taxation of US tax residents living in Israel, and of Israeli individuals and companies doing business in the United States. Offices are in Jerusalem, Ramat Gan and Beit Shemesh. Philip grew up on the South Side of Chicago, and graduated from the University of Illinois, followed by an MBA from the University of Michigan. Philip started his career in the tax department of what today is Ernst & Young. He has lectured at Roosevelt University, Loyal University and Northeastern University, and continued to lecture on international tax issues in Asia, Africa, Europe and North American. He is also a frequent speaker for Nefesh B’Nefesh and has advised the Israeli Treasury, Bituach Leumi and the Knesset on various tax issues affecting US citizens living in Israel. Philip’s love of radio led him to start his podcasts which have attracted tens of thousands of listeners. He continues to be an avid Chicago sports fan as well as a lover of mountain hiking, TRX, and snowshoeing (he likes to keep his feet on the ground!).
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