The Trump administration has proposed new regulations that could restrict access to certain refundable federal tax credits for some non-citizens, including many temporary visa holders such as H-1B workers.
The US Department of the Treasury and the Internal Revenue Service (IRS) announced the proposed regulations as part of an effort to clarify who is legally eligible to receive taxpayer-funded refundable individual income tax credits.
Treasury Secretary Scott Bessent said the administration is seeking to enforce existing federal law governing access to public benefits.
The proposal is based on the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, or PRWORA.
Under the proposed regulations, the refundable portion of certain tax credits would be treated as a federal public benefit. Eligibility would therefore be limited to US citizens, US nationals and “qualified aliens” as defined under federal law.
Qualified aliens generally include lawful permanent residents, refugees, asylees and certain other protected categories.
This could mean that many temporary visa holders, including H-1B workers who do not fall under the definition of qualified aliens, may not be eligible for the refundable portion of the affected credits if the proposal becomes final.
Four Tax Credits Covered
The proposed rules would apply to four individual income tax credits:
Adoption Tax Credit
Child Tax Credit
American Opportunity Tax Credit
Earned Income Tax Credit
To receive the refundable portion of these credits, a taxpayer would need to be a US citizen, US national or qualified alien on the date the federal income tax return claiming the credit is filed.
Taxpayers would also have to declare under penalty of perjury that they meet the eligibility requirements.
For married couples filing jointly, only one spouse would need to be a US citizen, US national or qualified alien.
Not Yet Final
The proposed regulations have not yet taken effect.
According to the Treasury Department, they would apply to tax years ending on or after the date the regulations are published in final form.
The proposal comes as the Trump administration continues to tighten immigration and visa-related policies.
If finalised in its current form, the regulations could create another financial concern for some H-1B families and other temporary visa holders who currently claim refundable portions of certain federal tax credits.
