(The Center Square) – The Trump administration unveiled a proposed rule clarifying that hundreds of thousands of noncitizen taxpayers are ineligible for refunds from four individual income tax credits. The move could save the U.S. up to $2.6 billion in 2026.
The Treasury Department and IRS said Wednesday that the refundable portions of the adoption tax credit, the Child Tax Credit, the American Opportunity Tax Credit for undergraduate education costs, and the Earned Income Tax Credit qualify as “federal public benefits” under the pending rule.
That means only U.S. citizens and “qualified aliens” could claim the refundable portion of those tax credits, which an estimated 29 million taxpayers receive each year.
“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.
“American taxpayers should not be forced to foot the bill for benefits going to those who are barred by law from receiving them. These proposed regulations end the abuse, protect the integrity of the tax system, and put Americans first.”
If enacted, the rule would disqualify 200,000 to 700,000 noncitizens from claiming the credit refunds, saving anywhere from $700 million to $2.6 billion in 2026, the rule draft estimates.
The term “qualified aliens” includes permanent residents; asylees; refugees; migrants residing in the U.S. on parole for at least one year; migrants whose deportation is withheld due to the dangers of returning to their home country; and certain Cuban, Haitian, and Pacific Islander migrants.
That means many migrants who illegally entered the U.S. and were admitted on parole under the Biden administration would still be eligible for the tax credit refunds. The rule also specifies that only one spouse on joint tax returns must be a U.S. citizen or “qualified alien” in order to claim the four tax credit refunds.
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