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Home » Treasury and IRS move to limit refundable tax credits to certain immigrants
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Treasury and IRS move to limit refundable tax credits to certain immigrants

Editor-In-ChiefBy Editor-In-ChiefAugust 20, 2026No Comments4 Mins Read
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The Treasury Department and the Internal Revenue Service proposed rules Wednesday that would limit access to refundable tax credits for certain immigrants.

Tax experts say the move could disqualify hundreds of thousands of people, especially low-income Americans, from receiving tax benefits and is the latest move by the Trump administration to use the nation’s financial safety net as a means to enforce stricter immigration policies.

Refundable tax credits allow households to receive some or all of their tax credits as a refund.

The proposed rule would clarify that the refundable portion of four tax credits are “federal public benefits”: the Adoption Tax Credit, the Child Tax Credit, the American Opportunity Tax Credit, and the Earned Income Tax Credit.

Margot Crandall Hollick, a senior researcher at the Urban-Brookings Tax Policy Center, said such a distinction would mean that many noncitizens with Social Security numbers and authorization to work in the United States would no longer be able to claim these tax breaks.

Read more CNBC’s personal finance coverage

These immigrants include people with pending asylum claims, Temporary Protected Status and Deferred Action for Childhood Arrivals (DACA) recipients, and others, she said.

Treasury Secretary Scott Bessent said in a press release that the proposed rules “protect the integrity of our tax system and put the American people first.”

Crandall Hollick said there were figures suggesting up to “millions” of people could be affected.

For example, there were 2.6 million asylum seekers in 2023, according to an analysis published last year by the Pew Research Center, a nonpartisan research group. Asylum applicants testify that they are unable or unwilling to return to their home country due to persecution or fear of persecution.

An additional 650,000 people received temporary protected status that year, according to Pew. These people are granted temporary relief from displacement due to situations such as armed conflict or natural disasters. Another 600,000 people were found to be enrolled in DACA, according to Pew. DACA is available to people who were brought to the United States illegally as children.

Those numbers have likely declined since then due to the Trump administration’s immigration crackdown, Pew said. For example, in June, the Supreme Court greenlighted the administration’s move to strip TPS protections from hundreds of thousands of Haitian and Syrian immigrants.

Treasury Secretary Scott Bessent testified about the Department’s priorities during a Ways and Means Committee hearing on Thursday, June 4, 2026, in Longworthville.

Tom Williams | Cq-roll Call Inc. | Getty Images

Mark Greenberg, an immigration expert at the Brookings Institution, said in a July analysis that the tax proposal comes amid broader efforts to “limit immigrants’ access to public benefits.”

Greenberg said the Republicans’ “big, beautiful bill” that President Donald Trump signed into law last year “narrowed eligibility” for programs such as Medicaid, Medicare, the Affordable Care Act Premium Tax Credit, the Child Tax Credit, and the Supplemental Nutrition Assistance Program.

If finalized, the Treasury and IRS proposal would treat only the refundable portion of the Adoption Tax Credit, Child Tax Credit, American Opportunity Tax Credit, and Earned Income Tax Credit as federal public benefits, according to a joint Treasury and IRS press release.

That means the immigrant group in question can still claim the non-refundable portion. In other words, tax credits only help reduce your annual tax liability to zero, rather than generating a refund.

Crandall Hollick said the policy would have the biggest impact on low-income households. They typically don’t owe as much tax based on their income, so they receive most of their tax relief as a refund, she said.

Additionally, for married couples filing a joint tax return, only one spouse must be a U.S. citizen, a U.S. national, or a “qualified alien” to receive the refundable portion of these tax breaks.

The proposal has a 45-day public comment period, with a public hearing scheduled for October 14th. The Treasury Department and the IRS will consider these comments before issuing the final rule.

According to the agencies, the proposed regulations would apply to taxable years ending on or after the date of publication as final regulations. In other words, if the rule were finalized this year, it would take effect starting with 2026 tax returns filed next year.

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