The Treasury Department and Internal Revenue Service announced proposed regulations on Wednesday designed to limit access to refundable tax credits for specific categories of immigrants. The rules would classify the refundable portions of four major tax credits—the adoption tax credit, child tax credit, American Opportunity tax credit, and earned income tax credit—as federal public benefits.
Under the proposed framework, noncitizens authorized to work and holding Social Security numbers would be prevented from accessing the refundable components of these credits. This restriction would apply to immigrants with pending asylum applications, those holding Temporary Protected Status, DACA recipients, and other similar groups. Tax policy experts estimate the changes could affect several million people, with particular impact on lower-income households that typically rely on refund portions of these credits to offset their limited tax liability.
Data from recent years illustrates the potential scope: approximately 2.6 million asylum applicants were recorded in 2023, along with 650,000 individuals with Temporary Protected Status and 600,000 DACA enrollees. Treasury officials characterized the proposal as protecting the integrity of the tax system and prioritizing American citizens. However, immigration policy analysts note this action represents part of a broader administration effort to restrict immigrant access to public benefits, following legislative changes implemented earlier.
Under the proposal, immigrants could still claim the nonrefundable portion of these credits, which would reduce their tax liability to zero but would not generate a refund. Joint filing rules would require only one spouse to meet citizenship or eligible status requirements. A 45-day public comment period has been established, with a public hearing scheduled for October 14. If finalized this year, the regulations would first apply to tax returns filed next year.
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