The U.S. Remittance Tax Is Now Law: What This Means for Americans Abroad

Just when you thought U.S. tax policy couldn’t get any more complicated, Congress has passed a major change: a federal remittance tax on money sent abroad. Starting January 1, 2026, anyone wiring funds out of the United States—including U.S. citizens, green card holders, and even non-citizens—will face a new 1% tax every time they send money overseas.

Why does this matter? For expats, cross-border families, and anyone relying on international money transfers, this is more than just another fee. The remittance tax adds a new layer of cost on top of already complex reporting rules, and it hits everything from family support and tuition to routine transfers between your own accounts.

Here’s what you need to know about the new remittance tax, who it affects, and what steps you should consider before your next international transfer.

What is a remittance tax?

When you send money from the U.S. to another country—whether it’s helping out family, paying for tuition, or simply moving your own cash—you’re making what’s known as a remittance. Traditionally, these transfers weren’t taxed by the U.S. government. But thanks to a new law passed by the House of Representatives in July 2025, that’s changed in a big way.

A remittance tax is a federal excise tax applied directly to outbound money transfers. Unlike a typical use tax or sales tax, this one isn’t tied to what you buy or earn—it’s simply a fee charged each time you send funds overseas. The goal? To increase tax payments to the Treasury, crack down on money laundering, and give the government more insight into international money flows.

How things used to work:

• The IRS did not consider remittances taxable income for the sender.
• There was no federal remittance tax; you only paid regular bank or transfer fees.
• Oversight focused mostly on anti–money laundering measures, not taxation.

What’s changed in 2025:

• The new law introduces a 1% federal remittance tax on most outbound transfers from U.S. accounts, from January 1, 2026.
• The tax applies whether you’re a U.S. citizen, green card holder, or even a non-citizen using U.S. accounts or U.S.-based money transfer services.
• Every qualifying transfer—whether for family support, business, education, or even sending money to yourself—gets taxed at the time of transfer.
• Banks, money transfer apps, and services like Western Union or Wise are now required to collect this tax and remit it to the IRS as part of your transaction.

This change is a response to years of debate in Washington about cross-border money flows, tax fairness, and money laundering. The Donald Trump-backed plan is now law, and it adds a new layer of complexity for anyone with international ties or responsibilities.

In short: If you’re sending money abroad, expect a new line on your receipt—and, possibly, on your annual tax return. The era of untaxed remittances is over, and Americans abroad (and at home) will need to adjust to a system where cross-border payments come with extra scrutiny and new tax payments.

How would a remittance tax work?

If you’re sending money to family members or friends in another country, your financial institution will now automatically add a 1% federal excise tax to your outbound transfer. This applies to most transfers in U.S. dollars sent from the United States to foreign bank accounts, with no minimum threshold. Here’s how the process breaks down:

• Who pays: U.S. nationals, green card holders, and even non-citizens sending money abroad from a U.S. account are responsible for the new tax bill. The sender always pays the tax—not the recipient.
• When it applies: The 1% tax rate will apply to all outbound remittances, no matter the amount or destination, from January 1, 2026.
• Which transactions: The tax on remittances covers nearly all electronic fund transfers in U.S. dollars sent from U.S. financial institutions to accounts overseas—including many developing countries. Inward remittances (money coming into the U.S.) are not taxed.
• How it’s collected: Your bank, credit union, or remittance service provider (such as Western Union, Wise, or PayPal) automatically collects the tax when you make your transfer and sends it to the IRS.

If you’re supporting family members overseas, paying tuition, or handling any international transfers, this new remittance tax will show up each time you send money out of the United States.

Who’s affected: Americans abroad, expats, and global families

The U.S. remittance tax doesn’t just target big business or billionaires—it hits everyday Americans who send money overseas for all sorts of reasons, from supporting family to paying tuition or making charitable donations.

Who will feel the impact?

• Anyone sending money from a U.S. financial institution or U.S.-based money transfer service to accounts overseas. This includes Americans abroad who use their U.S. bank accounts, not just those living in the U.S.
• Non-citizens and dual nationals in the U.S. remitting money back to their home country.
• Anyone transferring money out of the U.S. for business, education, or family support—potentially facing higher transaction costs.

The World Bank notes that developing countries like Mexico, India, El Salvador, and the Philippines—major destinations for U.S. remittances—could be hit hardest by these extra fees, with ripple effects on families, local economies, and global communities.

How does it affect international money transfers?

The new federal tax on remittances has an immediate impact on anyone transferring money from the U.S. to family members or other recipients abroad—especially through financial institutions, banks, or popular apps. Here’s what you can expect now that the law is in effect:

• Higher costs: Every international transfer—whether through Western Union, Wise, PayPal, your bank, or other remittance transfer providers—now includes an extra 1% tax on top of regular service fees. This can add up quickly, particularly for those sending frequent or large payments.
• Possible slower transfers: Financial institutions and money transfer services must now comply with the new reporting and collection requirements. In some cases, this could mean additional compliance checks or paperwork, potentially slowing down how fast your money reaches its destination.
• Tax complications: There are still unanswered questions about how the remittance tax interacts with your overall tax payments. It’s not yet clear if you’ll be able to deduct this tax or claim it as a credit on your U.S. tax return, or if you’ll face double taxation in both the U.S. and the receiving country.
• Tracking your transfers: Because the tax is collected at the time of transfer, you’ll need to keep a close eye on your transfer receipts and tax bill for accurate reporting—especially if you regularly support family members or make business payments overseas.

Tax deductions, credits, and compliance questions

With the new remittance tax in effect, U.S. taxpayers face fresh uncertainty at tax time. Will you get a credit for what you pay? What new reporting is required? Here’s what to watch for as rules and IRS guidance develop.

• Deductibility and credits: The remittance excise tax may be creditable against your U.S. tax bill—if you have a Social Security Number (SSN) and your remittance provider verifies and reports your details to the IRS. However, the IRS has yet to release final guidance on whether every taxpayer (especially those using non-qualified remittance providers) will be eligible for the credit, or how the process will work for dual nationals and those with ITINs. There’s no evidence you can deduct the tax as an expense.
• Reporting and timing: Taxpayers will need to report the total amount of remittance tax paid each year, likely on a dedicated line of their federal income tax return. You may be able to claim a credit at tax time, similar to systems in India or Mexico where outbound remittance taxes can sometimes be recouped by the sender.
• Compliance details: To claim the tax credit, expect to provide detailed personal information—including your SSN—when sending funds. Keep all receipts and documentation from your financial institution or remittance provider. This information may be requested by the IRS if they audit your return or question a credit claim.

The remittance tax debate: Who wins, who loses, and why it’s making headlines

The remittance tax is now the law of the land, but the controversy isn’t going anywhere. As banks and money transfer services roll out new procedures—and Americans sending money abroad see bigger fees—debate continues about who benefits, who gets hurt, and what’s next.

• What some love: Supporters say the tax will boost U.S. Treasury revenue, improve money-tracking, and make it harder for illicit funds to leave the country.
• What many hate: Critics warn of double taxation, more red tape for taxpayers and financial institutions, and real hardship for families and communities that rely on remittances—especially in developing countries.
• Why it’s so controversial: The new law remains a flashpoint in Washington, with ongoing debates about possible exemptions, enforcement challenges, and whether this tax should be a permanent part of U.S. tax policy.

What should Americans abroad do now?

If you regularly send money from the U.S. to family, pay overseas bills, or handle cross-border transfers, it’s time to keep your eyes on the news—and your receipts. The new remittance tax rules will hit fast, and being prepared can save you headaches (and money).

• Track your transfers: Start recording when, where, and how much you’re sending—especially if you use multiple banks, apps, or money transfer services.
• Ask questions: Find out how your bank or provider plans to handle new tax collection and reporting, so you’re not surprised at checkout.
• Stay informed: Follow updates from trusted tax sources, and don’t hesitate to talk to a cross-border tax advisor before making big transfers or changes to your usual routine.

No one likes tax surprises—so a little prep now can help you avoid confusion and extra costs if new rules arrive.

Stay ahead of the remittance tax curve

With the new remittance tax in effect, staying informed and prepared is more important than ever—especially for Americans living abroad and anyone making cross-border transfers. The rules and details will likely keep evolving as the IRS issues new guidance, so keeping up with the latest changes is key.

Don’t let tax law changes catch you off guard. If you want to feel confident about your U.S. taxes, wherever life takes you, Bright!Tax is here to help. Get in touch for expert support—so you can focus less on paperwork and more on enjoying life, at home or abroad.