WASHINGTON – A new Trump governance regulation set to take effect in tax year 2026 is drawing criticism for potentially denying tax credits to immigrant families, even those authorized to work in the United States. The rule stems from a Justice Department reinterpretation of existing law, allowing the Treasury Department to enforce restrictions on tax benefits for individuals without legal status.
Critics argue the change targets immigrants and complicates the tax process for those legally working and paying taxes. According to the Institute on Taxation and economic Policy, individuals already lacking work authorization are ineligible for these refundable tax credits, meaning the regulation will primarily impact those with authorization.
“It’s a terrible and unfair idea to deny tax credits to people who have paid taxes and are eligible for them as of their immigration status,” said Daniel Costa,director of Immigration Law and Policy Research at the Economic Policy Institute.”Implementing this will require determining who has status and who doesn’t, which is another way that the Trump administration will expand its deportation dragnet.”
Treasury Secretary Scott Bessent stated the regulation is intended to “enforce the law and prevent illegal aliens from claiming tax benefits intended for American citizens.”
Though, experts like Carl Davis, research director of the Institute on Taxation and Economic Policy, believe the administration is deliberately creating obstacles for taxpaying immigrants. NYU Tax Law Center Policy Director Brandon DeBot argued the Treasury’s reinterpretation “overrides such clear provisions of the tax code,” and that Congressional action would be required to enact such a change.Davis added that the move likely bypassed Congress due to a lack of broad public support, especially for targeting Dreamers and DACA recipients.
Undocumented immigrants contributed $100 billion in federal,state,and local taxes in 2022,and contribute billions to federal payroll taxes despite being ineligible for Social Security retirement benefits or Medicare.
