RESOLVING THE LEDGER
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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, according to Pew. These people are granted temporary relief from removal due to circumstances like armed conflict or natural disaster. A further 600,000 were enrolled in DACA, available to those brought to the U.S. illegally as children, Pew found.
Those numbers have likely decreased since then due to the Trump administration's immigration crackdown, according to Pew. For example, the Supreme Court in June green-lit the administration's move to strip hundreds of thousands of Haitian and Syrian immigrants of TPS protections.
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 programs like 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 October 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.
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