President Donald Trump’s Administration announced that it will move forward with new federal regulations to prevent undocumented immigrants from receiving the refundable portions of various tax credits, a move that could take effect in 2026 and would impact millions of families who file taxes each year.
The regulations, released by the Treasury Department, redefine these credits as “federal public benefits” under the Personal Responsibility and Work Opportunity Act of 1996 (PRWORA), a rule passed during Bill Clinton’s presidency that limits certain immigrants’ access to public programs.
What tax credits would be restricted?
If approved, only taxpayers with qualified immigration status-i.e., citizens, permanent residents and some immigrants with legal status-would be able to receive these refundable portions.
The proposal focuses on repayable portions of credits popular among working families, such as:
Earned Income Tax Credit (EITC)
Additional Child Tax Credit (ACTC)
Educational credits
Saver’s Credit for Retirement Savings
Refundable credits are payments that the IRS sends even if the taxpayer does not owe tax.
For example, a low-wage working parent may receive thousands of dollars a year through the EITC or ACTC.
Under the new interpretation, immigrants without legal status would be excluded even if they file taxes with an ITIN, something many families do today to keep up with the IRS.
The government’s justification
Treasury Secretary Scott Bessent said the measure seeks to “enforce the law and prevent undocumented immigrants from appropriating tax benefits intended for U.S. citizens”.
The Treasury Department release states that this interpretation is supported by a recent opinion from the Department of Justice’s Office of Legal Counsel, which concluded that the refundable credits can be legally classified as “federal public benefits.”
This interpretation allows the government to enforce the restrictions of PRWORA, a law that limits access to public benefits for immigrants without legal status.
What does the current law say?
Under current law, undocumented immigrants can no longer claim the EITC because this credit requires a valid Social Security number to work.
However, they can receive other refundable credits, such as the Additional Child Tax Credit, as long as the children have a valid Social Security number.
Trump’s new proposal seeks to close that window and prohibit any refundable credit to people without legal status, even if they have U.S. citizen children.
When would it come into effect?
The Treasury Department will soon publish the Notice of Proposed Rulemaking (NPRM), which will open a public comment period.
After that, the final version would be published, which could start to be applied as of 2026.
During this period, civil rights organizations, tax attorneys and community groups may file objections or recommendations before the regulation becomes final.
Who is affected by this measure?
This regulation would have significant effects on thousands of mixed-status families:
Undocumented parents with U.S. citizen children,
Workers who pay taxes with ITINs,
Families who rely on tax refunds to cover essential expenses such as rent, food or child care.
Experts say this measure could significantly reduce refunds for low-income households, affecting Latino families who already face high living costs.
Filed under: Trump would take away tax credits for undocumented immigrants.
