The Treasury Department and Internal Revenue Service unveiled proposed regulations on Wednesday that would limit access to refundable portions of four tax credits for certain noncitizen immigrants. The affected credits include the adoption tax credit, child tax credit, American Opportunity tax credit, and earned income tax credit. Under the new rules, these refundable portions would be classified as federal public benefits, making them unavailable to many immigrants who possess Social Security numbers and work authorization.
The proposed restrictions would apply to immigrants in various legal statuses, including those with pending asylum applications, individuals with Temporary Protected Status, and DACA recipients. Tax policy analysts estimate that several million people could be affected by the change. According to data from prior years, millions of people fall into these categories: approximately 2.6 million asylum applicants, 650,000 individuals with Temporary Protected Status, and 600,000 DACA enrollees were documented in 2023, though administration immigration enforcement efforts may have reduced these numbers since then.
The impact would be most significant for lower-income households, which typically lack substantial tax liability and therefore receive most tax credits as refunds rather than offsets against taxes owed. Under the proposed rules, affected immigrants could still claim the nonrefundable portion of these credits, meaning they could reduce their annual tax liability to zero but would not receive additional refunds. The rules include an exception allowing married couples filing jointly to receive the refundable portion if one spouse meets citizenship or qualified alien status requirements.
The administration characterizes the proposal as protecting tax system integrity. The initiative represents part of a broader effort to restrict immigrants’ access to public benefits, following legislative changes enacted last year that narrowed eligibility for programs including Medicaid, Medicare, and nutrition assistance. A 45-day public comment period is underway, with a public hearing scheduled for Oct. 14. If finalized later this year, the rules would apply to tax returns filed for 2026.
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