Sending Money to the US? Know About This New Tax Starting January 2026

Starting January 1, 2026, you'll pay an additional tax when you send money to the US. ?The One Big Beautiful Bill Act, signed into law on July 4, 2025, introduces a 1% excise tax on certain remittance transfers from the United States to foreign countries. This new tax affects individuals sending money abroad through specific payment methods, whether you're a US citizen, permanent resident, or immigrant.?

Here is everything you should know about what the new remittance tax is and how it works. We also cover which money transfers are subject to the 1% tax and which transfers are exempt, how to avoid the tax legally using alternative transfer methods, and what remittance transfer providers must do to collect and remit the tax to the IRS.?

What is the US remittance tax?

The US remittance tax is a federal excise tax imposed under IRC Section 4475 on certain money transfers from senders located in the United States to recipients in foreign countries.?

The 1% tax amount

The tax equals 1% of the transfer amount. If you send $10,000, you pay $100 in tax. If you send $500, you pay $5. There's no minimum threshold—the tax applies to transfers of any amount when cash or similar instruments are used.?

When will the remittance tax take effect?

The tax applies to all remittance transfers made after December 31, 2025. Transfers completed on or before December 31, 2025, are not subject to the tax. Starting January 1, 2026, every qualifying transfer faces the 1% charge.?

What is a remittance transfer?

IRC Section 4475 adopts the definition of remittance transfer from Section 919(g) of the Electronic Fund Transfer Act (EFTA).?

A remittance transfer means "the electronic transfer of funds requested by a sender located in any State to a designated recipient that is initiated by a remittance transfer provider". The designated recipient must be "any person located in a foreign country".?

How the remittance tax changed from 5% to 1%

The original House proposal included a 5% excise tax on remittances. That rate would have cost $500 on a $10,000 transfer—creating a massive financial burden on individuals supporting families abroad.?

Indian American communities, immigrant advocacy groups, and remittance industry stakeholders pushed back against the 5% rate. The House reduced the rate to 3.5% in subsequent drafts. The Senate further negotiated the rate down to 1% before President Trump signed the final version into law on July 4, 2025.?

Why this matters: A $10,000 transfer costs $100 at the 1% rate versus $500 at the 5% rate—a savings of $400 per transfer. For individuals sending regular monthly remittances, the reduction from 5% to 1% saves thousands annually.?

Who must pay the remittance tax?

The tax applies to all senders making remittance transfers using covered payment methods—regardless of citizenship, immigration status, or residence.?

US citizens, green card holders, H-1B visa holders, students on F-1 visas, undocumented immigrants, and anyone else sending money from the United States to foreign countries face the same 1% tax when using cash, money orders, or cashier's checks.?

No citizenship exemption

Earlier versions of the bill included exemptions for US citizens and nationals—those individuals would have received tax credits to offset the 1% charge when filing annual income tax returns. The final enacted version removed these exemptions entirely.?

No tax credit exists. No deduction applies. The 1% tax is a permanent cost that cannot be recovered through tax filings.?

Which money transfers are subject to the 1% tax?

IRC Section 4475(c) limits the tax to remittance transfers where "the sender provides cash, a money order, a cashier's check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider".?

The following payment methods trigger the 1% remittance tax:?

• Cash handed to Western Union, MoneyGram, or any other money transfer service
• Money orders purchased and presented to a remittance transfer provider
• Cashier's checks provided to initiate a transfer
• Similar physical instruments determined by the IRS (specific guidance pending)

Critical detail: The tax applies based on how you fund the transfer—not the recipient's location, not the transfer amount, not your citizenship. If you provide cash, the tax applies.?

Which money transfers are exempt from the tax?

IRC Section 4475(d) provides a critical exemption: transfers made with "withdrawn funds from an account at a financial institution" subject to the Bank Secrecy Act are NOT subject to the remittance tax.?

The following payment methods are exempt from the 1% tax:?

• Wire transfers initiated from your US bank account
• ACH transfers from your US checking or savings account
• Debit card transfers from US-issued debit cards
• Credit card transfers from US-issued credit cards
• Electronic transfers from credit unions, banks, and other BSA-regulated financial institutions
• Transfers through Wise, Remitly, PayPal, or similar platforms when funded directly from linked US bank accounts or cards

Why this matters: The exemption depends entirely on the source of funds. If the funds come from a bank account or card issued by a BSA-regulated financial institution, the transfer is exempt—even if you're sending to the same recipient in the same country using the same provider.?

What are the RTP obligations under IRC Section 4475?

IRC Section 4475(b) requires remittance transfer providers to collect the 1% tax at the time of transfer. The provider must add the tax to the total amount you pay before processing the transfer.?

If the RTP fails to collect the tax, the RTP becomes secondarily liable and must pay the tax to the IRS themselves. This creates a strong incentive for providers to collect the tax on every qualifying transaction.?

RTP reporting and remittance requirements

Remittance transfer providers must remit collected taxes to the IRS quarterly. The IRS has not yet published final reporting forms or procedures providers expect to use Form 720 (Quarterly Federal Excise Tax Return) or a similar mechanism.?

Providers must maintain records of all remittance transfers, amounts collected, payment methods used, and exemptions claimed.?

Impact on India and other high-remittance countries

India receives over $100 billion in remittances annually from the United States—the largest remittance corridor globally. The Philippines, Mexico, China, Vietnam, and Guatemala also receive significant remittance volumes from US senders.?

The Center for Global Development estimates India could lose slightly less than $500 million in formal remittances due to the remittance tax. However, the actual impact depends heavily on how many senders switch from cash-based transfers to bank account or card-based transfers.?

Why this matters: If 80% of current cash-based senders switch to exempt bank transfers, the tax revenue collected will be far lower than projected and the impact on recipient countries will be minimal. If senders continue using cash and simply absorb the 1% cost, the tax burden falls entirely on low-income households sending money to support families abroad.?

Remittance tax vs Form 3520 foreign gift reporting

The remittance tax is completely separate from Form 3520 foreign gift reporting requirements.?

Form 3520 requires US persons to report gifts or bequests received from foreign individuals exceeding $100,000 in a calendar year. Gifts received from foreign corporations or partnerships exceeding approximately $19,570 (adjusted annually) must also be reported.?

The remittance tax applies to money you send abroad. Form 3520 applies to money you receive from abroad. Both obligations can apply to the same individual in different circumstances—you might send $5,000 monthly to your parents (subject to remittance tax if using cash) and receive a $150,000 inheritance from a foreign relative (requiring Form 3520 reporting).?

Form 3520 is an information return, it doesn't create tax liability on properly reported gifts. The remittance tax is an excise tax, it creates actual tax liability that must be paid at the time of transfer.?

Business transfers and the remittance tax

IRC Section 4475 defines "person" broadly to include individuals and entities. This provision prevents individuals from forming LLCs or corporations to avoid the tax.?

Business payments to foreign vendors, contractors, or service providers may be subject to the 1% remittance tax if made using cash, money orders, or cashier's checks. Business wire transfers from corporate bank accounts remain exempt under the same rules applying to individuals.?

Example: A small business owner withdraws $8,000 cash and brings it to a remittance service to pay a foreign supplier. The 1% tax applies ($80). The same business owner initiates a wire transfer from the company's business checking account to the same supplier. No tax applies.?

Cryptocurrency transfers and the remittance tax

Cryptocurrency transfers to foreign recipients are exempt from the remittance tax. IRC Section 4475(c) limits the tax to transfers where the sender provides "cash, a money order, a cashier's check, or any other similar physical instrument". Cryptocurrency doesn't fit this definition.?

However, cryptocurrency transactions may trigger other tax obligations including capital gains tax on disposal of appreciated crypto, Form 8938 reporting if foreign crypto exchange accounts exceed thresholds, and FBAR reporting if foreign crypto wallet values exceed $10,000.?

What happens if you don't pay the remittance tax?

The remittance transfer provider is primarily responsible for collecting the tax. If the provider fails to collect the tax from you, the provider becomes liable and must pay the tax to the IRS.?

This creates a practical enforcement mechanism—providers will refuse to process the transfer if you don't pay the full amount including the 1% tax.?

If you somehow complete a transfer without paying the tax, the IRS can assess the unpaid tax amount plus penalties and interest. The provider will also face penalties for failure to collect and remit.?

How to avoid the remittance tax legally

You can completely avoid the 1% remittance tax by using exempt payment methods.?

#1 Use bank account transfers

Initiate wire transfers, ACH transfers, or online transfers directly from your US bank account. Most banks allow international transfers through online banking platforms—these transfers are exempt because the funds come from your account at a BSA-regulated institution.?

#2 Use debit or credit cards

Fund your transfer using a US-issued debit card or credit card. Many remittance platforms (Wise, Remitly, Xoom, ICICI Money2India) accept debit and credit card payments—these transfers are exempt from the tax.?

#3 Use digital transfer platforms

Services like Wise, PayPal, Remitly, and Xoom allow you to link your US bank account or card and send money electronically. As long as you fund the transfer from your linked account or card (not by bringing cash to a physical location), the transfer is exempt.?

#4 Never withdraw cash first

If you need to send money, do NOT withdraw cash from your bank and then bring it to a transfer service. That converts an exempt transaction into a taxable transaction.?

How NSKT Global can help with remittance tax planning and compliance

NSKT Global specializes in international tax planning for individuals and businesses navigating complex cross-border tax obligations, including the new remittance tax under IRC Section 4475.

Whether you regularly send money to family abroad, make business payments to foreign vendors or contractors, need guidance on large one-time transfers, or operate a remittance transfer business, NSKT Global ensures you minimize remittance tax costs through strategic payment method selection. We maintain full compliance with IRS reporting and collection requirements, understand how the tax interacts with other international tax obligations, and adapt quickly as IRS guidance and regulations develop throughout 2026 and beyond.