New 1% Remittance Tax 2026: What US Expats and Cross-Border Families Must Know

Starting January 1, 2026, a new 1% federal excise tax applies to certain international money transfers sent from the United States. Created under the One Big Beautiful Bill Act (OBBBA), this remittance transfer tax has generated widespread confusion among expats, immigrants, and cross-border families.

The good news: most electronic transfers are completely exempt. The bad news: if you're not paying attention to how you send money, you could be paying an unnecessary tax on every transfer.

Here's what you actually need to know.

What Is the Remittance Transfer Tax?

The remittance transfer tax is a 1% excise tax imposed on certain transfers of money from the United States to recipients in other countries. It was enacted as part of the One Big Beautiful Bill Act, signed into law on July 4, 2025, and took effect on January 1, 2026.

The tax is collected at the point of transfer by the remittance provider — not by you directly to the IRS. It's added on top of your transfer amount and any existing fees.

Example

If you send $5,000 to a family member in India using a cash-based transfer at a retail location, the provider collects an additional $50 in remittance tax from you at the time of the transaction.

Who Pays the 1% Tax?

The tax applies to senders who fund their international transfers using:

• Cash (physical currency at a retail location)
• Money orders
• Cashier's checks
• Other similar physical payment instruments

The remittance provider (Western Union, MoneyGram, check-cashing stores, etc.) is legally required to collect the tax from the sender and remit it to the IRS through semimonthly deposits and quarterly returns.

What's Exempt? (Most Transfers)

The following transfer methods are not subject to the 1% tax:

• Bank-to-bank wire transfers (including international wires)
• ACH transfers
• Transfers funded by debit card linked to a US bank account
• Transfers funded by credit card
• App-based transfers (Wise, Remitly, PayPal, Venmo, Zelle) when funded electronically from your bank account
• Brokerage or investment account transfers

In short: if you send money electronically from a US bank account, you don't owe this tax.

Why This Matters for US Expats

If you're an American living abroad or a dual citizen with family in another country, you likely send money internationally on a regular basis. Here's why you should care:

1. Supporting Family Abroad

Many US residents regularly send money to family members in countries like India, Mexico, the Philippines, and Nigeria. If you've been using cash-based services at retail locations, you're now paying an extra 1% on every transfer. On $10,000 annually, that's an unnecessary $100 tax.

2. Self-Employed Payments

Freelancers and business owners who pay contractors abroad using cash-based methods will also face this tax. Switch to direct bank transfers or platforms like Wise to avoid it entirely.

3. Property Transactions

If you're buying property in another country and funding part of the transaction through a cash-based wire service, the 1% adds up fast on large amounts. A $200,000 property down payment sent via cash-based service would carry a $2,000 tax.

How to Avoid the Remittance Tax (Legally)

This is straightforward:

1. Use electronic transfers. Send money through your bank's wire transfer service, ACH, or an app like Wise, Remitly, or PayPal — funded from your bank account or debit card.
2. Avoid cash-funded transfers. Don't walk into a Western Union or MoneyGram location with cash to send abroad. If you must use these services, fund the transfer with a debit card instead.
3. Use your bank's international wire service. Most US banks offer international wires for $15-45 per transfer. Even with the fee, it's cheaper than the 1% tax on large transfers.
4. Consider multi-currency accounts. Services like Wise offer multi-currency accounts with mid-market exchange rates and no remittance tax since transfers are electronically funded.

IRS Compliance and Reporting

The IRS issued proposed regulations in April 2026 clarifying the rules. Key points:

• Remittance providers must collect the tax at the time of transfer
• Providers file quarterly returns and make semimonthly deposits to the IRS
• The IRS has provided penalty relief for providers who fail to deposit on time during the initial rollout period
• The tax is not deductible on your personal tax return

You don't need to report remittance taxes paid on your Form 1040. The provider handles all IRS reporting.

Remittance Tax vs. FBAR and FATCA

Don't confuse the remittance tax with your existing foreign account reporting obligations:

All three are independent obligations. Paying the remittance tax doesn't satisfy your FBAR or FATCA requirements, and vice versa.

Frequently Asked Questions

Does the remittance tax apply to Wise or Remitly transfers?

No, as long as you fund the transfer electronically (from your bank account, debit card, or credit card). Cash-funded transfers at retail locations would be subject to the tax.

Does it apply to transfers to Canada?

Yes, the tax applies to transfers to any country outside the United States, including Canada. However, it only applies to cash-based funding methods. A bank wire to a Canadian account is exempt.

What if I send money to my own foreign bank account?

The tax applies based on the funding method, not the recipient. If you fund the transfer with cash at a retail location, the tax applies even if you're sending money to yourself. Use electronic methods to avoid it.

Is there a minimum transfer amount?

The IRS proposed regulations are still being finalized. Currently, the tax applies to transfers regardless of amount when funded by cash or cash-equivalent instruments.

Can I deduct the remittance tax?

No. The 1% remittance excise tax is not deductible on your federal income tax return.

What Zenith Recommends

For our cross-border clients, the action items are simple:

1. Switch to electronic transfers immediately if you're currently using cash-based services
2. Review your regular international payments — payroll, family support, property payments — and ensure they're all electronically funded
3. Don't forget your FBAR and FATCA obligations — the remittance tax is separate from your foreign account reporting requirements
4. Keep records of all international transfers for your tax files

If you need help with cross-border tax planning or have questions about how the remittance tax interacts with your expat filing obligations, book a free consultation with our team.