Treasury, IRS move to restrict refundable tax credits to certain immigrants

August 19, 2026 - 22:45

New guidance from the Treasury Department and the Internal Revenue Service is set to limit access to refundable tax credits for a specific group of immigrants, a change that tax experts say could affect hundreds of thousands of people. The new policy targets individuals who hold Social Security numbers and have valid work authorization but are not considered lawful permanent residents or U.S. citizens.

Under the updated rules, these immigrants would no longer be able to claim certain refundable credits, such as the Additional Child Tax Credit or the Earned Income Tax Credit, even if they file taxes and pay into the system. The rationale from the agencies is that these credits go beyond what is required under current law, and the new interpretation aims to align eligibility more closely with the intent of the original tax code.

Experts note that the impact will be significant. Many of the affected immigrants are visa holders, DACA recipients, and others who have been living and working in the country for years. They often file taxes using their Social Security numbers and have depended on these credits to offset low wages and support their families. Losing access to the refundable portion could mean a substantial financial hit for these households.

The move has drawn criticism from immigrant advocacy groups, who argue that the change punishes people who are following the rules and contributing to the economy. They also point out that the credits are designed to help working families, regardless of immigration status, as long as they have valid work authorization. Supporters of the restriction, however, say it is a necessary step to prevent misuse of the tax system and to ensure that benefits are reserved for citizens and permanent residents.

The IRS has said it will provide updated guidance to tax preparers and will adjust its processing systems to reflect the new rules. Taxpayers who may be affected are being urged to review their filing status and consult with a qualified tax professional before submitting their returns. The change is expected to take effect for the upcoming filing season, though the exact timeline has not been fully confirmed.