IRS Proposes Blocking Immigrants from Claiming Health Insurance Tax Credit

The U.S. Treasury Department and Internal Revenue Service proposed rules on October 14, 2026, that would restrict Affordable Care Act Premium Tax Credit eligibility starting with tax years beginning in 2027. The change would eliminate a route to the refundable subsidy for some immigrants who cannot enroll in Medicaid because of their immigration status.

The rule is proposed, not final. It would apply to plans bought through federal and state Affordable Care Act exchanges.

The affected group includes people with household income below 100% of the federal poverty level who qualify for the existing exception because their immigration status makes them ineligible for Medicaid. The proposal would remove that exception.

The change sits within broader eligibility and payment rules. It would also require more verification before the government sends advance subsidies.

The proposal narrows who can qualify and adds payment checks

Under the draft, eligibility would be limited to U.S. citizens, U.S. nationals and certain lawfully present noncitizens. The changes would affect the groups covered by the existing rules and their eligibility under the eventual final regulations.

Potentially affected categories include asylum applicants and asylum seekers, people with Temporary Protected Status, nonimmigrant-visa holders, deferred-action recipients and U-visa holders. Their treatment would depend on their specific immigration status and the final rules.

The proposal also changes how officials verify eligibility for advance payments. Applicants would need to establish household income and eligibility to enroll in the health plan.

Those checks concern subsidies paid in advance to lower monthly premiums. The rules cover plans purchased on either federal or state exchanges.

The subsidy reaches both monthly premiums and tax returns

The tax credit can be refundable. Eligible taxpayers may receive it even if they owe little or no federal income tax.

That means the proposed restrictions would affect both advance payments that reduce premiums during the year and the credit claimed when filing a tax return. The credit is not limited to taxpayers who have a federal income-tax bill.

The Congressional Budget Office estimates that 1 million lawfully present immigrants could lose health coverage because of the underlying tax-law changes. Many are low-income people who cannot receive Medicaid and currently use ACA subsidies to buy private coverage.

That estimate concerns the underlying legislation. The proposed regulations spell out how the administration would apply its provisions to credit eligibility and advance payments.

Treasury says the rules carry out the 2025 tax law

The rules stem from provisions in the Republicans’ 2025 tax-and-spending law. Treasury Secretary Scott Bessent and the IRS framed the proposal as an effort to implement the Working Families Tax Cuts and prevent fraud, abuse and improper payments.

The Treasury and IRS said:

“Today’s proposed rules implement the common-sense reforms enacted by the Working Families Tax Cuts to close eligibility loopholes and ensure taxpayer-funded Premium Tax Credits are reserved for eligible Americans.”

The regulations carry the identifiers REG-101576-26 and RIN 1545-BS15. The agency’s announcement describes the proposal as part of the administration’s implementation of the tax-law changes.

The proposal remains open for public comment

The administration has set out several steps before the proposal can become final.

The Department of Health and Human Services is expected to issue parallel regulations on exchange procedures and operational changes for checking eligibility for advance payments. The Treasury and IRS proposal has not yet become a final rule.