The Trump administration is proposing tighter eligibility rules for four refundable federal tax credits, estimating the changes would make nearly one million people ineligible for refundable portions of the programs and save taxpayers approximately $3 billion.
By yourNEWS Media Newsroom
The Treasury Department and Internal Revenue Service are moving to tighten eligibility for four major refundable tax credits, with the Trump administration saying the new rules will prevent people who are not legally eligible for federal benefits from receiving taxpayer-funded refunds.
Treasury Secretary Scott Bessent announced the initiative Wednesday, saying the proposed regulations would apply to the adoption tax credit, child tax credit, American opportunity tax credit and earned income tax credit.
According to a New York Post report, the administration estimates the changes will save taxpayers approximately $3 billion and restrict eligibility so the affected benefits are available only to U.S. citizens, U.S. nationals and qualified aliens.
“Under President Trump, the days of illegal aliens collecting taxpayer-funded benefits are over. The federal law is clear, and Treasury is enforcing it,” Bessent said in a Treasury Department statement.
Bessent also publicized the policy through an X post.
“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,” Bessent said.
The four programs affected by the proposed rules are refundable tax credits.
Unlike a nonrefundable credit, which generally can reduce a taxpayer’s liability to zero, a refundable credit can result in a payment to a taxpayer when the amount of the credit exceeds the taxes owed.
That feature makes eligibility rules particularly important because some recipients can receive money from the federal government even when their tax liability is lower than the value of the credit.
IRS Chief Executive Officer Frank J. Bisignano said refundable credits were created to provide financial assistance to qualifying American workers and families.
“Refundable tax credits, like the Earned Income Tax Credit (EITC), were enacted to help low-to-middle income American families and workers receive critical financial support,” Bisignano said.
“Today’s proposed regulations ensure that federally funded benefits are reserved for eligible taxpayers and protect the integrity of every taxpayer dollar.”
The administration estimates that nearly one million people would become ineligible for the “refunded portion of the affected refundable individual income tax credits” under the proposed changes, according to the New York Post.
The regulations would affect eligibility for four separate programs that serve different purposes.
The earned income tax credit provides assistance to qualifying low- and moderate-income workers and families.
The child tax credit provides tax relief associated with qualifying dependent children.
The American opportunity tax credit is tied to qualified higher-education expenses, while the adoption credit provides tax benefits associated with eligible adoption expenses.
Treasury’s proposal would impose citizenship or qualifying immigration-status requirements on access to the refundable portions of those programs.
The administration is presenting the change as an enforcement of existing federal restrictions on benefits rather than the creation of a new taxpayer-funded program.
Bessent said federal law already establishes limits on who may receive such benefits and that the new regulations are intended to ensure those restrictions are consistently reflected in the tax system.
The estimated $3 billion in savings would come from preventing refunds from being paid to people the administration says do not meet federal eligibility standards.
The move is another component of President Donald Trump’s broader immigration agenda, this time using federal tax policy to limit access to benefits for people who are unlawfully present in the United States.
Rather than changing the basic structure of the four tax credits, the proposal focuses on who can qualify for their refundable portions.
If implemented as proposed, Treasury and the IRS estimate nearly one million people would lose eligibility for those refunds while the federal government would avoid approximately $3 billion in payments.
Bessent framed the policy as both an immigration-enforcement measure and an effort to protect federal tax dollars.
“These proposed regulations end the abuse, protect the integrity of the tax system, and put Americans first,” he said.
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