Kids born abroad: U.S. citizenship and tax

A child born abroad to a U.S.-citizen parent is, in most cases, a U.S. citizen automatically — and therefore a U.S. taxpayer for life. The IRS will be interested in their income the moment it crosses the filing thresholds, and FBAR/FATCA will apply to their accounts the moment they cross those thresholds.

This is a feature for some families (passport, college aid, future U.S. life) and a burden for others (accidental Americans facing global tax filing). This article covers both sides: how citizenship is conferred at birth, what to do administratively, what the tax implications are for the child, and what you can do as a parent to set them up well.

Citizenship at birth — the rules

A child born outside the U.S. is a U.S. citizen at birth under U.S. nationality law if at least one parent is a U.S. citizen at the time of birth, and that parent has met a physical presence in the U.S. requirement before the birth. The exact requirement depends on whether the child was born in or out of wedlock and on the parents' status:

Both parents are U.S. citizens

If both parents are U.S. citizens and married, the child is a U.S. citizen at birth as long as at least one parent has resided in the United States at some point before the child's birth — even briefly. No specific number of years.

One U.S.-citizen parent (married)

If only one parent is a U.S. citizen and the parents are married, the U.S.-citizen parent must have been physically present in the U.S. for at least 5 years, of which at least 2 years were after age 14, before the child's birth.

This is the rule that catches second-generation expats. A U.S.-citizen parent who themselves was born abroad and never lived in the U.S. for 5+ years (with 2+ after age 14) cannot pass U.S. citizenship to their child. Citizenship doesn't compound across generations indefinitely.

One U.S.-citizen parent (out of wedlock)

The rules differ depending on whether the U.S.-citizen is the mother or the father. Both end up workable but require specific documentation:

• U.S.-citizen mother, foreign father: child is a U.S. citizen if the mother was continuously physically present in the U.S. for at least one year before the birth.
• U.S.-citizen father, foreign mother: child is a U.S. citizen if the father was physically present in the U.S. for 5 years (2 after age 14) before the birth, and acknowledges paternity in writing while the child is under 18 and agrees to financial support.

The administrative step: CRBA + SSN

Citizenship is conferred automatically by law, but you have to document it. The process:

1. Consular Report of Birth Abroad (CRBA)

Apply at the nearest U.S. embassy or consulate. The CRBA is essentially the U.S. equivalent of a birth certificate for a U.S. citizen born outside the country.

Required:

• The child's foreign birth certificate
• Both parents' marriage certificate (if applicable) and divorce records from prior marriages
• Both parents' passports / proof of citizenship
• Evidence the U.S.-citizen parent meets the physical-presence requirement (school transcripts, employment records, lease agreements, prior passports with U.S. entry stamps, tax returns)
• Photographs of the child
• The relevant fee (~$100)

Timeline: most embassies process CRBAs in 4–12 weeks. Some require an in-person interview.

The CRBA is the proof the child is a U.S. citizen. They will need it for U.S. passport applications, future SSN applications, and to demonstrate citizenship for tax/legal purposes.

2. U.S. passport

Most embassies will issue the child's first U.S. passport at the same appointment as the CRBA. The passport is the practical document the child will use; the CRBA is the legal proof of citizenship.

3. Social Security Number (SSN)

Apply for the SSN via Form SS-5 at the embassy at the same time as the CRBA, or shortly after.

The SSN is critical for U.S. tax purposes:

• You need it to claim the child as a dependent on your U.S. tax return.
• You need it to claim the Child Tax Credit and refundable portion. See Child Tax Credit from abroad.
• The child will need it for U.S. financial accounts, college applications (FAFSA), and future U.S. employment.
• It identifies them in the IRS system for their entire life.

Do this early. Every year you delay = a year without CTC eligibility for the family. A child without an SSN gets at most the $500 Credit for Other Dependents (non-refundable), versus the full $2,000 CTC with $1,700 refundable.

The child's lifelong U.S. tax obligation

Once a U.S. citizen, the child files U.S. tax returns whenever their income exceeds the filing thresholds. This includes:

• Earned income: from a part-time job, freelance work, etc. Filing threshold for an unmarried dependent is around $14,600 of earned income for 2025.
• Unearned income (interest, dividends, capital gains, gifts from non-relatives): kicks in at $1,300 for a dependent. The "kiddie tax" applies — unearned income above $2,600 is taxed at the parents' marginal rate until age 19 (24 if a full-time student).
• Self-employment: $400 threshold, the same as adults.

For most expat families with young children, this is theoretical — kids under 14 rarely have income. But it becomes practical:

• When the child starts working a foreign part-time job (typical at age 15–18 in many countries)
• When grandparents make gifts that produce investment income
• When the child inherits foreign assets

The child's FBAR obligation

If your minor child has signature authority over or financial interest in a foreign financial account, the child owes FBAR for any year the aggregate exceeded $10,000.

A foreign custodial account opened for a U.S.-citizen child by their non-U.S. grandparents is FBAR-reportable. Many expat families don't realize this and discover it years later. The child can be liable for back FBARs — though parents typically file on the child's behalf and assume the responsibility while the child is a minor.

The child's FATCA obligation

Form 8938 has the same higher thresholds for the child as for any single filer ($200K/$300K for those abroad). For most kids, this doesn't trigger — but a child with substantial inherited foreign assets can hit it.

Planning during the child's minority

A few things parents can do that pay off later:

Open a Roth IRA the moment the child has earned income

A U.S.-citizen child with earned income can contribute to a Roth IRA. Contributions are limited to actual earned income, up to the annual cap. A 16-year-old with $5,000 of earned income from a foreign part-time job can contribute up to $5,000 to a Roth IRA.

That money grows tax-free for 40+ years before withdrawal. Even modest teen contributions become substantial retirement balances. Use a U.S. brokerage that accepts overseas addresses (Schwab International, Interactive Brokers, Fidelity in many cases).

For this to work, the parent (if filing FTC, not FEIE) needs to have taxable compensation on their U.S. return to support the child's contribution — or the child needs to file their own return showing the earned income. See Roth IRA while abroad.

Avoid PFICs in custodial accounts

The most common expensive mistake: grandparents in Korea or Germany open a custodial brokerage account for their U.S.-citizen grandchild and buy local mutual funds. Those funds are PFICs, and the child's eventual sale of them is a tax disaster.

If foreign grandparents want to fund the child's future, suggest:

• Direct individual stocks (not PFICs)
• A U.S.-domiciled fund inside a U.S. brokerage account (parent-opened)
• Cash gifts that the parent then invests in U.S.-domiciled vehicles

Track physical-presence years for the child's future kids

If your U.S.-citizen child grows up entirely abroad and later has children of their own, your grandchildren may not be U.S. citizens unless your child has met the 5-year-with-2-after-14 physical-presence test.

To keep U.S. citizenship transmissible to future generations, the child should spend at least 5 years living physically in the U.S. before having their own children — ideally with 2 of those years after age 14. Even short stints (summer programs, a year of college, a 2-year internship) can count.

The dual-citizenship reality

A U.S.-citizen child born abroad almost always holds another citizenship by birth (the country of birth, the non-U.S. parent's citizenship, or both). Dual citizenship is permitted under U.S. law.

For U.S. tax purposes, only U.S. citizenship matters. The child files U.S. tax returns regardless of where they live or what other passport they hold. The other country's tax system applies according to its own rules.

Practical effects of dual citizenship:

• The child files U.S. taxes annually for life unless renounced.
• The child can use FEIE / FTC to avoid double tax on foreign earned income.
• The child's foreign bank may eventually ask for a W-9 and report the account to the IRS under FATCA.

Renouncing later — the option

Some U.S.-born-abroad citizens, on reaching adulthood, conclude that the U.S. tax obligation outweighs the U.S. citizenship benefits. They can renounce.

Key points:

• Renunciation requires the person to be 18 or older and to do it in person at a U.S. embassy. Parents cannot renounce on behalf of a minor.
• The current renunciation fee is $2,350.
• Renunciants who meet the §877A covered-expatriate tests owe exit tax — same as renouncing U.S. citizens. See the exit tax.
• The "Accidental American" relief programs (Streamlined + a recent relief procedure for those with very limited U.S. ties) may apply if the person has not been filing.

If renunciation is even possible in your child's future, do not let them become a covered expatriate by accident through tax non-compliance. Five clean years of returns before renouncing is the standard preparation.

Common mistakes

• Delaying CRBA / SSN. Every year of delay = a year of lost CTC for the family.
• Failing the physical-presence test. Second-generation expats sometimes can't pass citizenship to their kids; check the rules before assuming.
• Treating the child's foreign accounts as outside U.S. reporting. They aren't.
• Letting grandparents buy PFICs for the child. Sets up a future tax disaster.
• Skipping the Roth IRA opportunity when the child has earned income.
• Not filing the child's first U.S. return when they cross the unearned-income threshold via gifts and dividends.
• Assuming the child can "just renounce" later without realizing five years of tax compliance before renunciation is needed to avoid covered-expatriate status.

Next steps

• Child Tax Credit from abroad — the SSN + filing-status decisions
• ITIN vs. SSN
• The PFIC trap — what to avoid in custodial accounts
• Roth IRA while abroad
• Marrying a non-U.S. citizen: tax implications