Reconciliation provisions impacting immigrants and their families

Introduction

The current draft of the 2025 reconciliation bill contains numerous provisions targeting immigrants. These include massive enforcement spending such as $45 billion for immigrant detention centers, a 364% annual increase, and another $27 billion for Immigration and Customs Enforcement removal operations.

Somewhat less attention has been given to tax and health provisions affecting immigrants living in the United States, including legal immigrants. Congress is considering limiting immigrants’ access to certain tax benefits, levying an excise tax on remittances, and penalizing states that use their own funds to provide immigrant health insurance.

The bill emphasizes removing benefits for unauthorized immigrants, but they are already ineligible for most federal tax benefits, despite paying nearly $60 billion in federal taxes annually. The new provisions take existing eligibility restrictions further, limiting benefits for many groups who lawfully reside in the U.S., including lawful permanent residents, individuals with temporary work visas, and refugees.

The proposed changes in tax law, remittances, and health insurance are likely to worsen the financial well-being of U.S.-based immigrants and their families as well as communities abroad.

Enhancing the Child Tax Credit, but stripping benefits for children of undocumented immigrants

The Child Tax Credit (CTC) is a federal tax benefit that reduces tax liability up to $2,000 per child. It is partially refundable, meaning that low-income families with earnings above $2,500 can receive up to $1,700 per child even if they don’t owe the IRS any federal taxes.

Under current law, the $2,000 per child benefit is set to expire at the end of 2025, but the reconciliation bill proposes permanently expanding the CTC to $2,000 per child, adjusted for inflation, and further raising it to $2,500 for tax years 2025 through 2028. But under the proposed legislation many immigrant families will no longer be able to access the credit.

At present, the CTC is available for dependent children if the children are citizens, regardless of the taxpayer’s citizenship status—this includes lawful residents as well as undocumented immigrants. The new rule would require that taxpayers (and their spouses, if married and filing jointly) have their own work-eligible Social Security number (SSN) to claim the CTC.¹ If even one parent does not have an SSN, the family would be barred from receiving the CTC, impacting millions of mixed-status families who file taxes using an individual taxpayer identification number (ITIN) instead of an SSN.

It is well established that the CTC reduces child poverty. This bill risks reversing these benefits for millions of immigrant and mixed-status families: The Center for Migration Studies estimates that over 4.5 million children—the vast majority of whom are citizens—would become ineligible for the CTC due to one or both of their parents lacking an SSN. This would include nearly a million children in California and nearly a million children in Texas, implying a loss of billions of dollars in those states.

Other tax credits that taxpayers can use to offset the cost of higher education will also be affected: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). As with the CTC, the reconciliation bill seeks to impose an SSN requirement on taxpayers claiming postsecondary education tax credits. This, too, would affect citizen dependent children with a noncitizen parent; they would have to file their own tax return in order to remain eligible for the AOTC or LLC.

Limiting noncitizens’ access to health benefits

The government is heavily involved in the health insurance market in the United States. About 36% of the population relies on two main public health insurance programs: Medicaid (which covers low-income people) and Medicare (which covers people ages 65 and older and people with disabilities). There are also refundable premium tax credits that help low- and middle-income people who do not get coverage at work and are not eligible for Medicaid cover the cost of their monthly payments for insurance purchased through the Affordable Care Act (ACA) Marketplaces.

Undocumented immigrants are generally not eligible for federal health insurance benefits and not allowed to participate in the Marketplace. But some states offer health insurance to immigrants using their own funds. The reconciliation bill would reduce federal Medicaid funding for the 14 states and DC that have elected to fund these add-on programs for immigrants without legal status, reducing the match rate for the ACA Medicaid expansion population from 90% to 80%. The same reduction in the federal match rate would apply to 19 additional states that have elected to cover lawfully present children and/or pregnant people and adopted the ACA Medicaid expansion.

There are also substantial changes in the law for lawfully present immigrants, a group that includes lawful permanent residents (LPRs), humanitarian immigrants, temporary student and work visa holders, and other specific groups.

Most legal immigrants are barred from the Medicaid program for their first five years in the country. Under current law, lawfully present individuals generally qualify for premium tax credits in cases in which citizens do. In addition, lawfully present immigrants who arrived less than five years ago and are therefore barred from participating in the Medicaid program can access Marketplace premium tax credits instead. The new bill limits eligibility for premium credits to LPRs, certain Cuban immigrants, and citizens of Compact of Free Association (COFA) nations. Most other lawful immigrants, such as workers on H1-B and other temporary visas, would become ineligible. The bill would also eliminate the premium tax credit for newly arrived low-income legal immigrants.

This provision would likely lead to a steep rise in premiums and subsequent coverage losses for legal immigrants—a concerning possibility given that noncitizens are already insured at lower rates than citizens.

For example, consider a family of four earning $85,000 annually (272% of the federal poverty level), consisting of two lawfully present parents with work visas and two citizen children. Under the new provision, their premium for a “benchmark” silver-level Marketplace plan would rise from $347 to $1,587 per month—that is, from roughly 5% to 22% of their monthly income.

Marketplace premiums are set to rise for citizens, too, though to a smaller extent. The enhanced premium tax credits of the Inflation Reduction Act will expire at the end of 2025, and the reconciliation bill includes no plan to extend them.

Immigrants’ access to Medicare would also be restricted in the proposed legislation. Medicare is a federal health insurance program for individuals ages 65 and up and younger individuals with disabilities. The program provides health coverage to 68 million people as of 2024.  

Under current law, Medicare is available to lawfully present immigrants who have worked and paid Medicare taxes for a minimum of 10 years. Immigrants generally must have resided in the U.S. for at least five years to enroll in Medicare. Undocumented immigrants cannot participate in Medicare.

The new Medicare provision would limit eligibility to a subset of lawfully present immigrants: LPRs, certain Cuban immigrants, and citizens of COFA nations. Noncitizens who are work visa holders, Haitian entrants, or under Temporary Protected Status would be among the groups losing access to Medicare. This provision would deny benefits to elderly and disabled individuals who have paid into the Medicare program for more than the required 10 years.

Levying an excise tax on remittances

Remittances, or earnings sent home from migrant workers living abroad, are an important source of external financing for low- and middle-income countries. Globally, remittances are larger than official development assistance sent to these countries. The U.S. is the largest source of international remittances. The World Bank estimates that the U.S. sent an all-time high of $93 billion in remittances in 2023—and this is not including the many remittances sent through informal channels.

The reconciliation bill imposes a 5% excise tax on remittance transfers, paid for by the sender at the point of service. U.S. citizens and nationals are exempt from this provision. Remittances are already subject to income taxes and transfer fees, but this measure imposes additional costs—for every $100 post-tax dollars sent abroad, $5 would be collected by the IRS before it reaches its destination.  

The remittance tax would offset the deficit by an estimated $22 billion over ten years. The law would place firms like Western Union in the difficult position of checking the immigration status of each customer.

The effects of such a tax would reverberate widely and would be felt especially strongly by Mexico, India, China, and the Philippines, as they are the largest recipients of U.S. remittances.

Transforming the system for unaccompanied children

The reconciliation bill incorporates sweeping changes to the protections of unaccompanied non-citizen children at the border. For example, potential family sponsors for children would have to pay a minimum of $3,500 and would be subject to information sharing about immigration status, meaning that children will remain in detention longer. These changes may deter some children from coming to the border but will also greatly increase the risk of trafficking, abuse, and long-term detention for those that do come to the United States.

Conclusion

The proposed legislation comes on the heels of months of executive action upending immigrant lives in the United States. Some of the anti-immigrant provisions are being promoted as cost-saving or revenue-generating measures to offset other expensive provisions in the reconciliation bill—namely, extending the Tax Cut and Jobs Act (TCJA) tax breaks and financing border security initiatives—that will worsen our already bloated national debt. The reconciliation bill is consistent with a concerted effort of the current administration to make life in the United States difficult for immigrants and their children, regardless of legal status.