IRS Proposes Rules to Block Low-Income Legal Immigrants From ACA Tax Credits
The Trump administration proposed regulations on Wednesday that would block lawfully present immigrants whose income falls below the federal poverty line from accessing Affordable Care Act premium tax credits. The Internal Revenue Service issued the proposed rules, designated as REG-101576-26 (RIN 1545-BS15), which target individuals who earn 100% or less of the federal poverty level and remain ineligible for Medicaid because of their immigration status, Bloomberg Tax reported.
Under the drafted regulations, these low-income legal immigrants would lose eligibility for the refundable premium tax credit starting in tax years beginning in 2027. The policy stems from funding and tax provisions enacted in the Republican tax-and-spending legislation passed in 2025. Previously, lawfully present residents in this income bracket qualified for the marketplace subsidies to offset health plan costs.
Congressional Budget Office Projections and Savings Estimates
The Congressional Budget Office estimates that approximately 1 million lawfully present immigrants will lose health insurance coverage through the Affordable Care Act due to the statutory changes. At the same time, the federal government projects saving $91.4 billion over the next decade by cutting off access to the credits. Healthcare think tank KFF calculates that the broader legislative changes—which mirror restrictions applied to Medicare and Medicaid within the same tax law—will ultimately strip coverage from roughly 1.4 million legal immigrants.
The IRS measures mark the second major federal tax credit restriction advanced by the agency in recent months. In August, tax authorities proposed blocking undocumented immigrants from claiming the refundable portions of individual tax credits, including the earned income tax credit, the additional child tax credit, and the American opportunity tax credit.
Verification Mandates and Plan Restrictions
Beyond stripping eligibility for specific low-income households, the proposed rules outline strict computational guidelines for calculating family tax credits. The framework also bars health plans from qualifying for the federal marketplace subsidies unless insurers maintain an active, verifiable process to check applicant household income and legal eligibility for enrollment.
The regulatory shift coincides with related executive branch actions targeting immigrant use of public assistance. The Department of Homeland Security is currently defending a separate federal lawsuit challenging a rule that grants immigration officers broad discretion to weigh an applicant’s past use of public benefits during green card evaluations.
Impact on Immigrant Families and Public Health Advocacy
The rule ultimately leaves some lawfully present immigrant families with the impossible choice of gambling that accessing care won’t cost them their future,
Wright said.
Frequently Asked Questions About the ACA Tax Credit Changes
Which specific immigrants are targeted by the new IRS regulations?
The rules target lawfully present immigrants whose household income is 100% or less of the federal poverty line and who cannot enroll in Medicaid due to their specific immigration status.
When do these tax credit restrictions take effect?
The IRS regulations are scheduled to take effect for tax years starting in 2027, following the statutory changes mandated by the 2025 federal tax-and-spending legislation.
How much money does the federal government expect to save?
According to estimates from the Congressional Budget Office, restricting these tax credits will save the federal government $91.4 billion over the next decade.
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