New 1% U.S. Remittance Tax Begins in 2026
Beginning January 1, 2026, a new federal tax on certain international money transfers — commonly referred to as a remittance tax — will take effect in the United States. This change affects people who send money abroad using specific payment methods and may impact how workers, students, and immigrant families support loved ones overseas.
Understanding how this tax works, who it applies to, and what alternatives are available can help senders avoid unnecessary costs and plan ahead for 2026 and beyond.
What Is the New U.S. Remittance Tax?
The remittance tax is a 1% federal excise tax applied to certain international money transfers sent from the United States. It does not apply to all remittances. Instead, it is triggered based on the funding method used for the transfer.
Under the new rule, if you send money abroad using:
- Cash
- A money order
- A cashier’s check
the transfer will be subject to the 1% remittance tax.
The tax is calculated on the total amount sent and is collected at the time of transfer by the remittance service provider.
Example:
Sending $1,000 overseas using cash would result in an additional $10 remittance tax.
The law applies to transactions initiated after December 31, 2025.
Why This Remittance Tax Matters
Remittances are a financial lifeline for millions of households worldwide. Immigrant workers, international students, and expatriates often rely on regular transfers to support families, pay expenses, or cover essential costs abroad.
Until now, these transfers generally faced only provider fees. The new remittance tax introduces an additional federal cost for certain payment types. While 1% may seem minor, it can add up quickly for individuals who send money frequently or in large amounts.
Who Is Affected by the Remittance Tax?
The tax applies based on how the transfer is funded, not who is sending it.
Taxable Payment Methods
- Cash payments at remittance locations
- Money orders
- Cashier’s checks
Exempt Payment Methods
- Debit or credit cards
- Direct bank transfers
- Online or app-based transfers funded digitally
- Mobile wallets such as Apple Pay or Google Pay
This distinction creates a strong incentive to move away from cash-based transfers toward digital payment methods.
Impact on Common Remittance Scenarios
Immigrant Workers Sending Money Home
Workers who send funds monthly using cash or money orders may see recurring costs. For example, sending $200 per month in cash results in $24 per year in remittance tax alone.
Students Supporting Family Abroad
International students using in-person payment methods may face higher costs and should consider bank transfers or digital remittance apps.
Paying for Overseas Services
Individuals paying for foreign tuition, medical bills, or business services could incur additional tax if using physical payment instruments.
How to Avoid the 1% Remittance Tax
Because the tax applies only to certain funding methods, most digital options remain exempt. To avoid the tax, consider using:
- Bank-to-bank transfers
- Debit or credit card-funded payments
- Online remittance platforms
- Mobile wallet services
In many cases, digital transfers are not only tax-free but also faster and less expensive overall.
Possible Tax Credits and Future Guidance
The law includes provisions that may allow eligible taxpayers to claim a credit for remittance taxes paid, provided the transaction is properly reported by the remittance provider.
Additional IRS guidance is expected to clarify how these credits will be claimed. Until then, staying informed and consulting a tax professional is essential.
What Money Transfer Providers Need to Know
Remittance providers are responsible for:
- Collecting the remittance tax when applicable
- Depositing taxes with the U.S. Treasury
- Filing quarterly federal excise tax returns
To ease the transition, the IRS has offered limited penalty relief for errors during the first three quarters of 2026, as long as deposits are made timely and corrections are handled by filing deadlines.
Preparing for 2026: Tips for Senders
- Review your payment methods and switch from cash-based transfers where possible
- Monitor IRS guidance related to credits and reporting requirements
- Consult a tax professional to understand how the tax applies to your situation
- Confirm provider policies so you know how taxes will be collected and reported
Conclusion
The new 1% U.S. remittance tax effective January 1, 2026 represents a meaningful change for anyone sending money overseas using physical payment methods. While many digital transfers remain unaffected, those relying on cash, money orders, or cashier’s checks should plan ahead.
With the right payment choices and proactive tax planning, senders can navigate this change efficiently and avoid unnecessary costs.