Trump administration proposes rule barring illegal immigrants from refundable tax credits

The Trump administration proposed new rules Aug. 19 that would bar illegal immigrants and certain other noncitizens from receiving the refundable portions of four major federal tax credits, a move the administration says could save taxpayers up to $2.6 billion.

The proposed Treasury Department and Internal Revenue Service (IRS) regulations would apply to the refundable portions of the child tax credit, earned income tax credit, adoption tax credit, and American opportunity tax credit, according to a Treasury Department press release. Under the proposal, only U.S. citizens, U.S. nationals, and certain immigrants who qualify for federal benefits under the law would be eligible to receive the refundable payments.

“Under President Trump, the days of illegal aliens collecting taxpayer-funded benefits are over. The federal law is clear, and Treasury is enforcing it,” Treasury Secretary Scott Bessent said in the release. “American taxpayers should not be forced to foot the bill for benefits going to those who are barred by law from receiving them.”

He added that the regulations “end the abuse, protect the integrity of the tax system, and put Americans first.”

The rules seek to apply the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 to refundable tax credits. Under the proposed rules, immigrants who do not qualify could still use a tax credit to lower the amount of federal income tax owed but could not receive any leftover amount as a cash refund.

The administration estimates the rule would make 200,000 to 700,000 taxpayers ineligible for those refunds in 2026, saving taxpayers an estimated $700 million to $2.6 billion.

“Refundable tax credits, like the Earned Income Tax Credit (EITC), were enacted to help low-to-middle income American families and workers receive critical financial support,” IRS Chief Executive Officer Frank Bisignano said in the release. “Today's proposed regulations ensure that federally funded benefits are reserved for eligible taxpayers and protect the integrity of every taxpayer dollar.”

According to CNBC, there is a 45-day public comment period on the proposal and a public hearing scheduled for Oct. 14 before the rule can be finalized. If finalized, the rules would apply to tax years ending on or after the date the final regulations are published.