Starting 2026, certain international money transfers from the United States now carry a 1% federal excise tax. If you are a US expat, dual citizen, green card holder, or part of a cross-border family sending money internationally, this new tax could affect you — even if it was not designed with you in mind. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced this levy as part of a broader package of fiscal reforms. Here is what you need to know to stay compliant and minimize your exposure.
Key Takeaways
- 1% federal excise tax on certain outbound international remittances from the US, effective for transfers after December 31, 2025
- Only cash-funded transfers are taxed: cash, money orders, and cashier's checks used for international transfers
- Electronic transfers are exempt: wire transfers, ACH, bank-to-bank, and electronic platforms (IRS confirmed)
- Expats are caught in the crossfire — the law targets undocumented immigrants but is written broadly enough to affect anyone using cash-funded methods
- Treasury has authority to expand scope — electronic methods could potentially be added later via regulation
What Is the Remittance Tax?
The 1% remittance excise tax was introduced under Section 5701 of the One Big Beautiful Bill Act (OBBBA), signed by President Trump on July 4, 2025. It imposes a 1% federal excise tax on "specified remittance transfers" — outbound international money transfers from the United States that are funded by cash or cash-equivalent instruments.
The tax is effective for transfers made after December 31, 2025, meaning any qualifying transfer in 2026 and beyond is subject to the levy. The stated policy rationale was to generate revenue from remittance flows sent by undocumented immigrants to their home countries — a politically charged issue during the 2024-2025 legislative cycle. However, the statutory language does not limit the tax to any particular immigration status. It applies to anyone making a qualifying transfer, regardless of whether they are a US citizen, permanent resident, visa holder, or undocumented individual.
This broad drafting means US expats sending money to family members abroad, dual citizens moving funds between their US and foreign accounts, and cross-border families making routine transfers are all potentially caught — if they use cash-funded methods. The tax is collected by the money transfer operator (MTO) or financial institution at the point of transfer and remitted to the IRS.
Source: One Big Beautiful Bill Act, Pub. L. No. 119-XX, § 5701 (2025); Congress.gov
What Transfers Are Taxed?
The key distinction under the OBBBA remittance tax is how the transfer is funded — not the amount, destination, or identity of the sender. Here is the breakdown:
| Transfer Method | Taxed (1%)? | Examples |
|---|---|---|
| Cash deposit | Yes | Walking into Western Union with cash |
| Money order | Yes | USPS money order sent internationally |
| Cashier's check | Yes | Bank-issued check for international transfer |
| Wire transfer | No | Bank wire to foreign account |
| ACH transfer | No | Electronic ACH to international bank |
| Bank-to-bank transfer | No | Moving funds between your US and Canadian bank accounts |
| Electronic platform | No | Wise, XE, Remitly (electronic funding) |
The IRS issued interim guidance in early 2026 confirming that electronically-funded transfers — those initiated via bank account debits, debit cards linked to bank accounts, or electronic payment systems — are not "specified remittance transfers" under the statute. This means the vast majority of modern international transfer methods are exempt.
The critical factor is the funding source, not the transfer service. If you walk into a Western Union location and hand over $5,000 in cash to send abroad, the 1% tax applies. If you use Western Union's app and fund the same transfer from your bank account electronically, it does not.
Source: IRS Notice 2026-XX, Interim Guidance on Specified Remittance Transfers (January 2026)
How It Affects US Expats and Cross-Border Families
While the political narrative around the remittance tax focused on undocumented immigrants, the law's reach extends far beyond that group. Here are the scenarios where US expats and cross-border families may encounter this tax:
- Expats sending money to family in their home country — A US citizen living in London who sends cash via a money transfer agent to parents in India faces the 1% tax
- Dual citizens moving money between countries — A US-Canadian dual citizen using cashier's checks to transfer between US and Canadian accounts triggers the tax
- Snowbirds transferring funds seasonally — Canadians with US green cards who use money orders to move funds for winter living expenses could be affected
- Cross-border business payments — Small business owners paying international contractors via cash-funded transfers are subject to the excise
- Families supporting relatives abroad — Immigrant families sending regular support payments via cash remittance services
The math is straightforward: On a $10,000 cash-funded international transfer, the 1% excise equals $100 in additional tax. On the same $10,000 sent via wire transfer, the tax is $0. Over a year of regular monthly transfers (say $3,000/month), that is $360 in avoidable tax — on top of whatever transfer fees the service already charges.
For expats, this tax is particularly frustrating because it was not designed for them. Most expats already use electronic transfer methods for convenience and cost savings. But those who occasionally use cash-funded services — perhaps because their receiving country has limited banking infrastructure, or because elderly family members prefer cash pickup — now face an additional federal levy on top of existing transfer fees.
Pro Tip:
The simplest way to avoid the remittance tax: use electronic transfer methods. Wire transfers, ACH payments, and bank-to-bank transfers are explicitly exempt. If you currently use cash-based services like Western Union cash pickups or money order transfers, switch to electronic alternatives like Wise, XE, or your bank's international wire service. The exemption is based on funding method, not the service provider.
Impact on US-Canada Cross-Border Transfers
For our clients at Zenith Financial Advisors, the US-Canada cross-border corridor is the most relevant. Here is how the remittance tax intersects with common Canada-US transfer scenarios:
- Canadians with US income sending money home: If you work in the US and send cash remittances to family in Canada, the 1% applies. Switch to electronic bank transfers between your US and Canadian accounts — most major banks (TD, RBC, BMO) offer cross-border account linking for free electronic transfers.
- Dual citizens moving RRSP distributions: When you receive RRSP or RRIF distributions and transfer them to a US account, ensure the transfer is electronic. If your Canadian institution issues a cashier's check for the distribution, depositing it internationally could trigger the excise.
- Snowbirds transferring seasonal living expenses: Many Canadian snowbirds transfer $20,000-$50,000 annually for their winter stays in Arizona or Florida. At 1%, that is $200-$500 in avoidable tax if using cash-funded methods. Use Wise, XE, or a bank wire instead.
- Cross-border business payroll: Canadian businesses paying US-based remote workers via international money orders would face the tax. Electronic payroll transfers (ACH, wire) are exempt.
The good news for most of our cross-border clients: if you are already using modern electronic transfer services, you are likely unaffected. The tax primarily impacts those relying on legacy cash-based transfer methods that are increasingly uncommon in the US-Canada corridor.
Will the Tax Expand?
This is the question every cross-border professional is asking. The OBBBA grants the Treasury Department regulatory authority to expand the definition of "specified remittance transfers" through administrative rulemaking. This means that electronic transfers — currently exempt — could be brought within scope without new legislation.
Several tax policy analysts have flagged this risk. The original legislative proposals in early 2025 included electronic transfers in the tax base, but they were narrowed during negotiations to secure votes. The statutory framework leaves the door open for Treasury to reverse this exemption.
What to watch for:
- Treasury Notices or Proposed Regulations expanding the definition of specified remittance transfers
- IRS guidance addressing specific platforms (Wise, PayPal, Venmo international transfers)
- Congressional proposals to raise the rate above 1% or lower exemption thresholds
We recommend monitoring IRS announcements and Treasury regulatory actions throughout 2026 and 2027. If you receive professional tax advice, ensure your advisor is tracking this issue.
Source: Joint Committee on Taxation, Technical Explanation of the OBBBA Revenue Provisions (JCX-XX-25); Tax Policy Center analysis, July 2025
Frequently Asked Questions
Does the 1% tax apply to wire transfers?
No. The IRS has confirmed that electronic transfer methods — including wire transfers, ACH payments, and bank-to-bank transfers — are exempt from the 1% excise tax. The tax only applies to transfers funded by cash, money orders, or cashier's checks. If you initiate a transfer electronically from your bank account, regardless of which service you use, you are not subject to the remittance tax.
Do expats have to pay this tax?
It depends entirely on the transfer method, not your status. US expats who send money internationally using cash-funded methods (cash, money orders, cashier's checks) are subject to the 1% excise tax regardless of citizenship, residency, or immigration status. Expats using electronic methods (wire transfers, ACH, bank-to-bank, Wise, XE) are exempt. The law does not distinguish between immigrants, citizens abroad, or domestic residents — it targets the transfer method.
Is the remittance tax on top of income tax?
Yes. The 1% remittance excise tax is a separate federal tax imposed on the transfer itself. It is not a credit against your income tax liability, is not deductible on your return, and does not reduce any other tax obligation. It applies in addition to income taxes, FICA taxes, and any other federal obligations. Think of it like a sales tax on the transfer — a separate levy on the transaction itself.
How do I report the remittance tax?
You do not file a separate return for the remittance tax. The money transfer operator (MTO) or financial institution facilitating the cash-funded international transfer is responsible for collecting and remitting the 1% excise tax to the IRS. The tax is either withheld from your transfer amount or added as a fee at the time of the transaction. You should receive documentation from the transfer service showing the excise amount collected.
Can I avoid the remittance tax legally?
Yes — and it is straightforward. Switch from cash-funded transfer methods to electronic alternatives. Wire transfers, ACH payments, bank-to-bank transfers, and electronic platforms (Wise, XE, Remitly funded from a bank account) are all explicitly exempt under current IRS guidance. The exemption is based on the funding source, not the service provider or destination country. There is no dollar threshold or frequency limit that triggers the tax on exempt methods.
Affected by the Remittance Tax? Let Us Help.
Our cross-border tax specialists help US expats, dual citizens, and international families navigate new tax obligations. Book a free consultation to review how the OBBBA remittance tax affects your specific situation and transfer patterns.
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