- The Treasury Department and IRS on Wednesday proposed rules to restrict the immigrant groups eligible to claim the refundable portion of certain tax breaks.
- They include the adoption tax credit, child tax credit, American opportunity tax credit and earned income tax credit.
- The move could impact hundreds of thousands, if not millions, of people, experts said.
- It’s the latest move by the Trump administration to use federal benefits as a way to enforce stricter immigration policy.
Kent Nishimura | Reuters
The Treasury Department and Internal Revenue Service proposed rules on Wednesday to restrict access to refundable tax credits for certain immigrants
Tax experts say the move would potentially disqualify hundreds of thousands, if not millions, of people — particularly lower earners — from the tax benefits and represents the latest move by the Trump administration to use the nation’s financial safety net as a way to implement stricter immigration policy
Refundable tax credits allow households to receive some or all of the tax credit as a refund
The proposed rules clarify that the refundable portion of four tax credits — the adoption tax credit, child tax credit, American Opportunity tax credit and earned income tax credit — are “federal public benefits.”
Such a distinction would mean many noncitizens who have Social Security numbers and who have received authorization to work in the U.S. would no longer be able to claim those tax breaks, said Margot Crandall-Hollick, a principal research associate at the Urban-Brookings Tax Policy Center
These immigrants include people with a pending asylum application, those with Temporary Protected Status and Deferred Action for Childhood Arrivals, or DACA, recipients, among others, she said
The proposed rules “protect the integrity of the tax system, and put Americans first,” Treasury Secretary Scott Bessent said in a press release
Figures suggest up to “several million people” could be impacted, Crandall-Hollick said
For example, in 2023, there were 2.6 million asylum applicants, according to an analysis published last year by the Pew Research Center, a nonpartisan research group. Asylum applicants attest that they are unable or unwilling to return to their countries due to persecution or a fear of persecution
Another 650,000 people that year had Temporary Protected Status These people are granted temporary relief from removal due to circumstances such as armed conflict or natural disaster. A further 600,000, Pew found, were enrolled in DACA, which is available to those brought to the U.S. illegally as children
Those numbers have likely decreased since then due to the Trump administration’s immigration crackdown the Supreme Court in June greenlit the administration’s move to strip hundreds of thousands of Haitian and Syrian immigrants of TPS protections
Treasury Secretary Scott Bessent testifies during the Ways and Means Committee hearing on the priorities of the Treasury Department in Longworth building on Thursday, June 4, 2026.
Tom Williams | Cq-roll Call, Inc. | Getty Images
The tax proposal comes amid a broader effort “to restrict immigrants’ access to public benefits,” Mark Greenberg, an immigration expert at the Brookings Institution, wrote in an analysis in July
Republicans’ “big beautiful bill” that President Donald Trump signed into law last year “narrowed eligibility” for programslike Medicaid, Medicare, Affordable Care Act premium tax credits, the child tax credit and the Supplemental Nutrition Assistance Program, Greenberg said
The Treasury and IRS proposal, if finalized, would treat only the refundable portion of the adoption tax credit, child tax credit, American opportunity tax credit and earned income tax credit as a federal public benefit, according to a joint press release from the agencies
That would mean that the immigrant groups in question could still claim the nonrefundable portion. In other words, the tax credit would only help them reduce their annual tax liability to zero, rather than generate a refund
The policy would have the greatest impact on lower-income households, Crandall-Hollick said. They generally don’t have a big tax liability due to their incomes, and therefore receive most of the tax break as a refund, she said
Additionally, for married couples who file a joint tax return, only one spouse would need to be a U.S. citizen, U.S. national or “qualified alien” in order to receive the refunded portion of these tax breaks
There is a 45-day public comment period on the proposal, and a public hearing is scheduled for Oct. 14. The Treasury and IRS will consider these comments before issuing a final rule
The proposed regulations would apply to tax years ending on or after the date the regulations are published as final regulations, according to the agencies. In other words, if the rules are finalized this year, they would apply to 2026 tax returns filed next year
