Hundreds of thousands of US citizen children could lose access to key benefits as part of a Trump administration proposal to strip tax credit refunds away from immigrant families, including those with legal status.
In August, the US Treasury Department and Internal Revenue Service (IRS) proposed rules redefining four tax credits—the adoption tax credit, child tax credit (CTC), American opportunity tax credit, and earned income tax credit (EITC)—as “federal public benefits” under a decades-old welfare reform law, meaning that certain groups of noncitizens, not considered “qualified aliens,” would be ineligible to claim refunds from them.
Among them are undocumented immigrants, but also many people with temporary nonimmigrant visas, as well as holders of Temporary Protected Status (TPS), and recipients of Deferred Action for Childhood Arrivals (DACA).
According to the Treasury and IRS, the average refunded benefit among all taxpayers whose claims contain at least one of the affected credits is $3,656.
Reporting on the proposal last month, CNBC described it as an effort to “use the nation’s financial safety net as a way to implement stricter immigration policy” and noted that low-income recipients, who are less likely to have large income tax bills to refund, would be hit the hardest.
In a policy brief published on Monday, a group of experts at the Center on Budget and Policy Priorities (CBPP)—director of federal tax policy Kris Cox, vice president for immigration policy Shelby Gonzales, deputy director of federal tax policy Samantha Jacoby, and senior research analyst Claire Zippel—examined the likely effects of the policy.
They estimated that the proposal would take away access to the refundable portion of the CTC and/or the EITC for 1 million people in affected families, including US citizens and people with lawful immigration statuses.
While the proposed rule estimates that between 200,000 and 700,000 taxpayers would become ineligible, the researchers said this understated the potential impact because it only included the tax filers themselves, without noting that their family members would also be hurt.
Using immigration status data from the Department of Homeland Security, the researchers said they determined that “the rule would take access to refundable credits away from hundreds of thousands of US citizen children if both parents—or their parent, for single-parent families—have an immigration status that is not a ‘qualified’ status.”
“For 30 years, no administration, Democratic or Republican, has treated refundable tax credits this way,” the researchers said. “The proposed rule includes a misguided reinterpretation of a 1996 law that created restrictive immigration-related eligibility standards for ‘federal public benefits,’ taking away access to basic needs programs from many immigrants with lawful statuses.”
“The Trump administration is seeking to apply those same immigration-related restrictions—which require people to have a ‘qualified’ immigration status—to the refunded portion of certain tax credits,” they continued. “This contradicts both the clear reading of the statutory text and congressional intent, which Congress has demonstrated by legislating on immigrant eligibility for tax credits several times since the 1996 law, most recently in 2025.”
They noted that the new policy follows other efforts by the administration to restrict access to other programs for families with immigrants, including Head Start, child welfare services, and health services, all of which are being challenged in court.
Many of the people who’d be barred from receiving the credit refunds, the researchers said, are especially vulnerable, including:
“Taking away these tax credits would harm people who are immigrants and their families, including many US citizen children, who are critical to the nation’s future prosperity,” the researchers said, pointing to studies linking additional income from tax credits with improved health, education, employment, and earnings.“
“People who are immigrants and their families contribute to our communities and nation in immeasurable ways,” they concluded. “These restrictions on tax credits create a higher effective tax rate for people who are filing their taxes solely based on their immigration status.”