Hundreds of thousands, and potentially several million, immigrants who hold Social Security numbers and authorization to work in the U.S. would lose refundable tax credit refunds if the Treasury Department and Internal Revenue Service finalize a new rule. The agencies proposed on Wednesday to treat the refundable portion of four credits — the adoption tax credit, child tax credit, American Opportunity tax credit and earned income tax credit — as federal public benefits. That classification would disqualify many noncitizens from receiving refunds, according to tax experts cited by the agencies.
Margot Crandall-Hollick, principal research associate at the Urban-Brookings Tax Policy Center, said the proposal would particularly hit lower earners who typically get most of these credits as refunds rather than reductions in tax liability. She warned the change could affect up to "several million people." The proposal emphasizes that the nonrefundable portions of the credits would remain available, meaning affected taxpayers could still use the credits to reduce tax owed to zero but would not receive an extra payment as a refund.
The administration framed the measure as a regulatory safeguard. Treasury Secretary Scott Bessent said in a press release the rules "protect the integrity of the tax system, and put Americans first." Critics see the move as part of a wider push to shrink immigrant access to programs that provide financial relief. Mark Greenberg of the Brookings Institution wrote in July that the administration has sought "to restrict immigrants' access to public benefits," citing recent legislative and regulatory changes that narrowed eligibility for several programs.
The proposal targets groups including people with pending asylum applications, those holding Temporary Protected Status and Deferred Action for Childhood Arrivals recipients, among others, Crandall-Hollick said. To illustrate scale, a Pew Research Center analysis found 2.6 million asylum applicants in 2023, about 650,000 people with Temporary Protected Status that year, and roughly 600,000 enrolled in DACA. The agencies note the numbers could change as immigration policy evolves.
Under the proposed rule, couples filing jointly would still be able to claim refundable amounts if one spouse is a U.S. citizen, U.S. national or "qualified alien." The Treasury and IRS have opened a 45-day public comment period and scheduled a public hearing on Oct. 14. The agencies will review feedback before issuing any final regulation, which would apply to tax years ending on or after the date the rules are published as final; if finalized this year, they would affect 2026 tax returns filed next year.
