If you’re an Australian expat living in the United States, tax season can be a maze. One document that consistently pops up for families is IRS Publication 972 — the official guide to the Child Tax Credit. As tax laws shift for 2025, understanding how this publication affects your tax return could mean a difference of thousands of dollars. Whether you’re new to the US or a seasoned filer, this guide demystifies Publication 972 and highlights what’s new for the year ahead.
What is IRS Publication 972?
IRS Publication 972 is the Internal Revenue Service’s comprehensive resource on claiming the Child Tax Credit (CTC) and the Additional Child Tax Credit (ACTC). While it’s designed for all US taxpayers, it’s particularly relevant for Australians who have relocated stateside and now need to navigate a new set of tax rules.
- Purpose: Explains who qualifies for the CTC and ACTC, how to calculate the credit, and what documentation you’ll need.
- Audience: US tax residents, including non-citizens who meet residency and income thresholds — which often includes Australian expats.
- Key Forms: Works in tandem with Form 1040, Schedule 8812, and sometimes Form 8862 for those with previous credit disallowances.
The CTC reduces your federal tax liability and, in some cases, provides a refundable amount even if you owe no tax. Publication 972 walks you through eligibility, phase-outs, and calculation worksheets.
2025 Updates: What’s Changed for Australian Families?
The US Child Tax Credit has seen several changes over the past few years, with pandemic-era expansions now replaced by more permanent updates for 2025. Here’s what’s new this tax year:
- Credit Amount: For 2025, the base Child Tax Credit remains USD $2,000 per qualifying child under age 17.
- Refundability: Up to USD $1,600 of the CTC is refundable as the Additional Child Tax Credit if your tax liability is low.
- Income Thresholds: The phase-out begins at USD $200,000 for single filers and USD $400,000 for joint filers — unchanged from 2024, but always review the latest IRS release as these numbers may be indexed for inflation.
- Residency Rules: The child must have lived with you in the US for more than half the year and possess a valid Social Security Number (SSN) by the tax return due date.
- Filing Status: Australian expats must generally file as US tax residents to qualify, even if they maintain ties to Australia.
For Australians on temporary visas or working under treaty provisions, extra scrutiny may be required to determine tax residency and eligibility. If you’re claiming the Foreign Earned Income Exclusion (FEIE), your CTC might be reduced, as Publication 972 explains.
How to Maximise Your Child Tax Credit as an Expat
Making the most of IRS Publication 972 means understanding the nuances of your family and income situation. Here’s how Australian expats can optimise their claims in 2025:
- Check SSN Requirements: Your child must have a valid SSN issued before the tax filing deadline. An Individual Taxpayer Identification Number (ITIN) is not sufficient for the CTC.
- Understand Dual-Resident Issues: If you’re filing taxes in both Australia and the US, check the US–Australia tax treaty and avoid double-claiming the same dependent or credit.
- Use the Worksheets: Publication 972 includes detailed worksheets to help calculate your credit and determine if you qualify for the refundable portion. These are essential if you have complex income or multiple dependents.
- Watch for Legislative Changes: US Congress frequently debates CTC expansions or cuts. While the 2025 rules are stable for now, always check IRS.gov or the latest Publication 972 before filing.
- Document Your Residency: Keep proof that your child lived with you for the required period, especially if you travel between Australia and the US for work or family reasons.
Consider this example: An Australian couple living in California with two children under 17 and a joint income of USD $180,000 could claim up to USD $4,000 in Child Tax Credits, with up to USD $3,200 potentially refundable if their tax liability is low. However, if one parent claims the FEIE, the credit may be reduced or eliminated, so careful tax planning is essential.
Common Pitfalls and Solutions
Publication 972 is clear, but the application can get murky for expats. Here are some common stumbling blocks:
- Missing the SSN Deadline: If your child doesn’t have a US-issued SSN by the tax return deadline, you lose eligibility for the CTC that year.
- Improper Dependent Claims: Only one taxpayer can claim the same child for the CTC. Divorced or separated parents should review IRS tiebreaker rules.
- Overlooking the Refundable Credit: Even if your US tax liability is zero, the Additional Child Tax Credit can provide a refund — but only if you complete Schedule 8812 correctly.
- Exchange Rate Fluctuations: If you have Australian-source income, use IRS-approved exchange rates for converting AUD to USD.
As always, accuracy and up-to-date knowledge of both US and Australian tax rules are your best defence against costly errors.
Conclusion
IRS Publication 972 is more than just a booklet — it’s your roadmap to maximising the Child Tax Credit as an Australian in the US. With the 2025 tax year bringing stable but nuanced rules, careful preparation can make a tangible difference to your family’s finances. Stay proactive, keep your documentation in order, and review the latest IRS guidance before you file.
