Written by:
Lucy Smart, Director of Tax Education and Training
Tonaeya Moore, Director of Policy
In August 2026, the Department of the Treasury proposed a change to the tax code that would deny vital tax credits to lawfully present immigrants. Under the new rule, U.S. residents with Temporary Protected Status, DACA recipients, and families applying for asylum – all who already are authorized to work in the U.S. – from claiming refundable tax credits based on their earned income, number of children, and higher education expenses.
Refundable tax credits are tax benefits that can be received as refunds if you do not have any remaining tax liability for the year. The refundable credits targeted in the proposed rule – the Earned Income Credit, the Additional Child Tax Credit, the American Opportunity Credit, and the Adoption Tax Credit – incentivize work, support people pursuing higher education, and provide resources for families raising children. These tax credits provide essential cash assistance that lifts millions of people above the poverty line every year. Even more, tax credits are linked to better infant health, improved school performance, and projected increases in earnings in adulthood.
This change would significantly lower the incomes of lawfully present immigrant families who are working, paying taxes, and contributing to their communities in countless other ways. This proposed rule is one of many actions that threaten the well-being and economic security of these community members. Just last year, tax law was changed to prevent parents of U.S. citizen children from claiming the Child Tax Credit, if they did not have legal status themselves.
Like many states, Maryland offers its own Earned Income Credit and Child Tax Credit, both which have refundable portions. Maryland has taken the right step in decoupling these state-level tax credits from their federal counterparts. Regardless of immigration status, Marylanders working and raising children receive this vital income boost to ensure they can continue to support their families and their communities.
CASH will continue working with our partners to protect immigrant families’ access to refundable tax credits. These credits help families with everyday necessities, and they also boost local economies through spending at small businesses. Immigrant families work, pay taxes, and contribute to our communities. Our tax policies should reflect those contributions and give immigrant families the same opportunities to build financial security as their neighbors.
Submit a public comment on the proposed rule by October 4 through http://www.regulations.gov/
Sources:
National Immigration Law Center, “FAQ: The Federal Government Wants to Deny Refundable Tax Credits to Many Immigrants” — nilc.org
Institute on Taxation and Economic Policy, “Tax Credit Restrictions for Immigrant Filers and DACA Recipients” — itep.org
Center on Budget and Policy Priorities, “The Earned Income Tax Credit” — cbpp.org
Center on Budget and Policy Priorities, “Income Support Associated With Improved Health Outcomes for Children, Many Studies Show” — cbpp.org