The U.S. Remittance Tax Is Now Law: What This Means for Americans Abroad (2026 Guide)

A routine money transfer could now come with an unexpected extra cost. Starting in 2026, a new U.S. remittance tax applies to certain transfers sent abroad, including some used to support family or move money across borders.

The good news is that the final law is much narrower than earlier proposals. The tax rate is 1%, and several common transfer methods are generally excluded or exempt. Whether you pay it depends on how you send the money and whether an exemption applies. Knowing the rules can help you avoid unnecessary charges and keep the right records.

What the U.S. remittance tax is and how it became law under the One Big Beautiful Bill

The U.S. remittance tax is a new 1% federal excise tax on certain money transfers sent from the U.S. to recipients in other countries. It became law as part of the One Big Beautiful Bill Act (OBBBA), which added IRC Section 4475 to the Internal Revenue Code.

This isn’t a tax on the money you earn. It’s a tax on certain ways of sending money abroad. So if you use a U.S.-based account or transfer service to pay bills, support family, or move money overseas, whether the tax applies depends on how you fund the transfer and whether you qualify for an exemption.

What changed during the legislative process

Earlier versions of the proposal would have taxed more transfers at a higher rate. Before the bill became law, Congress reduced the rate to 1% and narrowed its scope, leaving many routine bank-based transfers outside the tax.

The changes also mean that earlier estimates and analyses of the proposal, including those produced during the legislative process by the Joint Committee on Taxation, may describe a broader version of the tax than the one that ultimately became law.

The final version comes down to the way a transfer is funded. The 1% tax applies to covered remittances funded with cash, a money order, a cashier’s check, or a similar physical instrument.

What counts as a remittance transfer

A remittance transfer generally means sending money from the U.S. to a recipient in another country through a bank, money transfer company, app, or similar provider. These international money transfers can be handled by banks, apps, and other remittance transfer providers.

This can include:

• Sending support money to parents overseas
• Paying a landlord abroad from the U.S.
• Sending money to a family member through a transfer counter
• Using an app or transfer platform to send money to someone outside the U.S.

Not every remittance transfer is subject to the new tax. Whether you pay it depends on factors such as how the transfer is funded and whether an exemption applies.

Why Americans abroad should care

Living abroad doesn’t necessarily put your money outside the reach of this rule. If you still use a U.S. bank account, send money from the U.S., or rely on someone there to send you support, the remittance tax could affect certain transfers.

The tax is also separate from your other U.S. tax and reporting obligations. It doesn’t replace requirements such as FBAR or Form 8938 reporting, and it isn’t the same as the Foreign Earned Income Exclusion or the rules for gifts to family members.

How the 1% excise tax works: rates, calculations, and effective dates under IRC Section 4475

Under IRC Section 4475, taxable remittance transfers are subject to a 1% tax. That means you pay $1 in tax for every $100 sent.

The basic calculation

For a taxable transfer:

• A $500 remittance results in $5 of tax.
• A $2,000 remittance results in $20 of tax.
• A $10,000 remittance results in $100 of tax.

The tax is based on the amount transferred, separate from any service fees charged by the provider.

Examples of how the rule may apply

Scenario	Transfer amount	Tax result
Cash transfer at a retail counter to a recipient abroad	$1,000	$10 tax
Bank-account-funded transfer from a U.S. checking account	$1,000	No remittance tax
U.S. citizen using cash at a retail counter	$1,000	$10 tax
Green card holder sending a taxable cash remittance	$1,000	$10 tax

The funding method determines whether the 1% remittance tax applies. Cash, money orders, cashier’s checks, and similar physical instruments are subject to the tax, while other funding methods are outside its scope.

Effective date under IRC Section 4475

The new excise tax applies to covered remittance transfers made after December 31, 2025. That means qualifying transfers made on or after January 1, 2026, may be subject to the tax.

If you regularly move money across borders, now is a good time to review how you send it. Check whether your usual transfer method is subject to the tax and adjust your funding source to an exempt electronic option to avoid the fee.

Why provider setup will matter

Two people can send the same amount to the same country and still have different outcomes under the law. One may use a bank-account-funded transfer that is generally exempt, while another may use cash at a transfer counter and owe the 1% excise tax.

That is why the provider’s ability to identify your funding method and verify any exemption can affect what you pay at the time of transfer.

Which transfers are taxable and which are exempt: cash, wire transfers, money orders, and more

How you send the money plays a major role in whether the 1% tax applies. Cash-based remittances are the clearest taxable category, while many transfers funded through a qualifying bank account or card are exempt.

General guide to common transfer types

Transfer type	General treatment	Why it matters
Cash sent through a money transfer counter	Taxable	The 1% tax applies to cash-funded remittances
Cash-funded money order, cashier’s check, or similar physical instrument sent abroad	Taxable	These physical payment methods are covered by the tax
Bank wire funded from your U.S. bank account	Not subject to the remittance tax	The tax does not apply to transfers funded directly from a bank account
ACH or online transfer funded directly from a U.S. account	Not subject to the remittance tax	The tax does not apply to account-funded transfers
Debit, credit, or prepaid card-funded transfer	Not subject to the remittance tax	Qualifying card-funded transfers can fall within an exemption

Your actual result can depend on your funding source, whether you qualify for an exemption, and whether your provider can verify it.

Cash transfers are most likely to be taxable

If you walk into a transfer location, hand over cash, and send money to a recipient overseas, the 1% tax is more likely to apply. The same can be true if you use cash to buy a money order or similar payment instrument for an international remittance.

Bank wires and account-funded transfers are usually in a better position

Many Americans abroad use U.S. bank accounts to pay rent, tuition, mortgage costs, or support family overseas. If your transfer is funded through a qualifying U.S. financial account, it may be exempt from the 1% tax.

That doesn’t mean every wire or account-funded transfer is automatically exempt. The funding source and whether it meets the law’s requirements still matter.

Exemptions that matter most in real life

The key exemptions are based on how you fund the transfer:

• Transfers funded through a qualifying U.S. financial account, such as an ACH transfer or bank wire
• Transfers funded through a qualifying U.S.-issued debit, credit, or prepaid card

Your citizenship or immigration status does not determine whether the tax applies. A cash-funded remittance is subject to the 1% tax regardless of who sends it.

What this means for your day-to-day planning

How you send money may matter more than how much you send. If you regularly use cash-based transfer services, switching to a qualifying account-funded method could help you avoid the 1% tax.

Who pays the remittance tax: U.S. citizens, expats, green card holders, and non-residents explained

The 1% remittance tax can apply to any sender, including U.S. citizens, Americans living abroad, green card holders, nonresident aliens, and temporary visa holders. What determines whether you pay the tax is how you fund the transfer.

Quick breakdown by sender type

Sender category	Likely treatment
U.S. citizen	Pays the 1% tax on a covered transfer funded with cash or a covered physical instrument
U.S. national	Pays the 1% tax on a covered transfer funded with cash or a covered physical instrument
U.S. citizen living abroad	Same rules apply when making a covered remittance transfer from the U.S.
Green card holder	Pays the 1% tax on a covered transfer funded with cash or a covered physical instrument
Nonresident alien or temporary visa holder	Pays the 1% tax on a covered transfer funded with cash or a covered physical instrument

U.S. citizens and expats

U.S. citizenship does not provide an exemption from the remittance tax. If you fund a covered transfer with cash, a money order, a cashier’s check, or a similar physical instrument, the 1% tax applies.

Living abroad does not change the rule. What matters is whether you make a covered remittance transfer from the U.S. and how you fund it.

Green card holders

Green card holders follow the same funding-based rules. A covered remittance funded with cash or a covered physical instrument is subject to the 1% tax, while qualifying account- or card-funded transfers are not.

Nonresidents and temporary visa holders

The same rule applies to nonresidents and temporary visa holders. Immigration status does not create an exemption from the tax. A covered remittance funded with cash or another covered physical instrument is subject to the 1% tax.

Real-world examples for Americans abroad

• U.S. citizen in France: You fund a transfer from a U.S. bank account to pay your landlord in France. The transfer is not subject to the 1% remittance tax.
• U.S. citizen visiting the U.S.: You use cash at a transfer counter to send money to family in Brazil. The 1% tax applies.
• Green card holder living in Canada: You use cash at a transfer counter in the U.S. to send money to relatives in India. The 1% tax applies.

The same funding method receives the same tax treatment regardless of the sender’s citizenship or immigration status.

How the tax is collected: The role of banks, transfer services, and facilitating entities

The remittance tax is generally collected when you make the transfer. The bank, money transfer service, app, or other facilitating entity handling a covered remittance is responsible for determining whether the tax applies and collecting it from the sender.

What happens when you initiate a transfer

A provider that handles a covered remittance will generally need to:

• Determine whether the transaction is a covered remittance transfer
• Identify whether the transfer is funded with cash, a money order, a cashier’s check, or a similar physical instrument
• Calculate the 1% excise tax if a taxable funding method is used
• Collect the tax from the sender at the time of transfer
• Show the tax on the transaction record or receipt

If the tax applies, you will generally pay it as part of the transfer rather than later when you file your tax return. The provider handles the tax from there, including reporting it and making required semimonthly deposits under IRS and U.S. Treasury rules.

The role of banks

A bank may process the transfer directly, or your bank account may simply fund a transfer handled by another provider.

The distinction can affect how the transfer is treated. A transfer funded through a qualifying U.S. bank account may be exempt, while a cash-based remittance may be subject to the 1% tax.

The role of transfer services and apps

Money transfer services and digital payment platforms may handle the collection process directly. Depending on the transfer, the provider may need to:

• Identify whether the transaction is a covered remittance transfer
• Determine whether the funding method is subject to the tax
• Calculate and collect the 1% tax when it applies
• Report and remit the tax as required

You may be asked to confirm your funding source before completing a transfer.

What “facilitating entities” means for you

The law can apply to businesses beyond traditional money transfer companies. If a platform facilitates an international remittance covered by the law, it may be responsible for collecting the tax as part of the transfer process.

How to protect yourself from overcollection

Good records can support tax compliance and help you understand what you are being charged before completing a transfer:

• Check which funding method you are using
• Review the transfer summary before sending the money
• Confirm that any remittance tax shown matches the funding method
• Save receipts showing the transfer amount, fees, and any remittance tax collected

If the tax appears on a transfer funded through a method that is not subject to the tax, check with the provider before completing the transaction. Senders cannot claim a credit or refund after the remittance tax has been collected, so any potential error should be addressed before the money is sent.

Want help making sense of the new remittance rules?

The new remittance tax may affect how you send money abroad, but it is separate from the U.S. tax and reporting obligations that follow Americans overseas. If you’re unsure how a transfer, foreign account, or other part of your finances should be handled on your U.S. return, you don’t have to sort through the rules alone.

Bright!Tax works exclusively with Americans abroad. Our expat tax professionals can help you understand your obligations, catch potential issues, and file accurately from wherever you live. Contact us today to get the clarity and support you need to stay on top of your U.S. taxes abroad.

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