On Wednesday, the Treasury Department and Internal Revenue Service announced proposed rules that would restrict access to refundable tax credits for certain immigrant groups, potentially impacting hundreds of thousands to millions of individuals.
Tax experts, including Margot Crandall-Hollick from the Urban-Brookings Tax Policy Center, indicate that this change would primarily affect lower earners, as refundable tax credits allow households to receive refunds beyond their tax liabilities.
The proposed rules classify the refundable portions of four specific tax credits—the adoption tax credit, child tax credit, American Opportunity tax credit, and earned income tax credit—as 'federal public benefits.' This classification would disqualify many noncitizens, including those with Social Security numbers and work authorization, from claiming these credits.
Notably, this includes individuals with pending asylum applications, those with Temporary Protected Status, and DACA recipients. The implications are significant, as Crandall-Hollick estimates that up to several million people could be affected, with 2.6 million asylum applicants and 650,000 individuals with Temporary Protected Status reported in 2023.
The proposed regulations are part of a broader effort by the Trump administration to limit immigrants' access to public benefits, which has included previous legislation that narrowed eligibility for various assistance programs. If finalized, the rules would apply to tax years ending after the regulations are published, potentially impacting tax returns filed in 2026.
A public comment period is open for 45 days, with a hearing scheduled for October 14, allowing stakeholders to voice their opinions before the final rules are established