Going forward, undocumented immigrants will be completely unable to receive benefits from four major refundable tax credits, including the Child Tax Credit.
On the 20th, the U.S. Treasury Department and the IRS published a draft of new regulations regarding eligibility requirements for individual income tax credits in the Federal Register. The IRS plans to gather public opinion for the next 45 days and hold a public hearing on October 14 to finalize the regulations. Once the final regulations are published in the Register and finalized, they will be fully applied starting with tax filings for the confirmed tax year. According to these regulations, undocumented immigrants who do not have a Social Security Number (SSN) or file taxes using an Individual Taxpayer Identification Number (ITIN) will be completely prohibited from receiving major refundable tax benefits, including the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC), and Adoption Credit.
The proposed regulation announced on this day is being pursued to strengthen the enforcement of the Personal Responsibility and Work Opportunity Adjustment Act (PRWORA), enacted in 1996. The intent is to strictly limit legal eligibility by clearly defining the “refund portion” of certain refundable tax credits as Federal Public Benefits. Treasury Secretary Scott Bessent emphasized, “Under the Trump administration, the era of undocumented immigrants receiving benefits funded by taxpayers’ money is over.” He added, “U.S. taxpayers should not bear the cost of benefits paid to those legally prohibited from receiving them.
This amendment is a measure that upholds fairness in the tax system and puts Americans first.” According to the new regulation, eligibility for Federal Public Benefits, including refundable tax credits, requires being a U.S. citizen, a U.S. national, or a qualified alien as of the filing date of the federal income tax return. Qualified aliens include permanent residents, asylum seekers, refugees, and other specific groups defined by PRWORA. Taxpayers must declare on their tax returns that they are eligible to receive the refund portion of the relevant deduction, subject to penalties for perjury. In the case of joint filing by married couples, only one spouse needs to be a U.S. citizen, U.S. national, or a qualified alien. Immigration policy experts estimate that this measure will cause more than one million undocumented immigrant households in the U.S. to lose tax benefits.
Consequently, the financial burden on undocumented families and ITIN taxpayers within immigrant communities, including the Korean community, is expected to increase significantly. Immigration law and tax experts advised, “Previously, it was possible to claim refund-type deductions for certain children with ITINs, but once the final regulations are confirmed, the path to refunds will effectively be blocked.” They added, “Since incorrectly claiming deductions while failing to meet eligibility requirements could lead to disadvantages during future permanent residency applications or status adjustments, taxpayers should consult with a professional in advance to meticulously re-examine their eligibility requirements when filing future taxes.”