Sending Remittances Are Now More Expensive Thanks to Trump. Here’s What to Do | Banking Advice
Key Takeaways
- The U.S. began imposing a 1% tax on some money transfers to other countries this year.
- The tax on remittances applies to transfers sent as cash, money orders and cashier’s checks.
- Bank transfers and money sent via debit card or credit card are not subject to the tax.
If you’ve ever sent money from the U.S. to someone in another country, you probably grumbled a bit at the price you paid to send those funds. Fees and exchange rates can take a sizable bite out of the initial amount.
Now you have one more cost to consider: a tax.
This year, the U.S. began imposing a 1% remittance tax on some types of international transfers. Enacted last July as part of the One Big Beautiful Bill Act, the excise tax could generate about $10 billion in revenue over the next decade, according to U.S. government estimates.
Initially proposed as a 5% tax only on non-U.S. citizens, the figure was eventually revised down to 1% and applied to any individual sending money internationally using “cash and similar instruments” such as money orders or cashier’s checks. Funds sent using bank transfers, debit cards or credit cards are not subject to the tax.
While remittances can refer to a variety of cross-border transfers of money from one individual to another, the term is commonly used to refer to money sent from foreign workers back home to their families in other countries.
Experts say most people – especially those with U.S. bank accounts – can sidestep the tax. Migrant workers, who are more likely to send money using services such as Western Union, are likely to feel the impact of the tax more acutely, experts say.
Here’s what you should know if you plan to send money abroad in the future.
What Types of Transfers Are Taxed?
The remittance tax is imposed on international transfers made with cash, money orders, cashier’s checks or similar methods. You’ll pay 1% of the total amount you’re sending.
For example, if you send $500 to your family overseas from a Western Union kiosk, you’ll pay a $5 tax as part of the transaction. Taxes are collected by the financial services facilitating the transfer and sent along to the U.S. Treasury on a quarterly basis.
The tax doesn’t apply to bank transfers such as ACH or wire transfers. It also doesn’t apply to transfers made by debit card or credit card. Proposed regulations released in April by the IRS clarified that remittances sent using prepaid debit cards won’t be taxed.
Who Will Be Affected by the 1% Remittance Tax?
Generally speaking, the tax will affect anyone who chooses to send a cash-based transfer from the U.S. to another country. However, some may be impacted more than others.
Migrant Workers and Their Families
The tax will likely have the greatest impact on migrant workers and other noncitizens who may not have a U.S. bank account and who frequently send money back home, says Felix Shipkevich, a payments regulatory attorney and special professor of law at Hofstra University. These individuals typically send remittances in the form of cash or money orders.
“It’s going to primarily affect certain types of communities or individuals who send money abroad,” says Shipkevich. “Those who are unbanked or underbanked or don’t have bank accounts in the U.S. and prefer to send money using cash.”
Expats, Students and Remote Workers Abroad
Experts say the tax will affect some Americans who are living or spending extended time in other countries. While many of these individuals and their families may already move money through bank transfers, those who rely on money orders or other cash-based transfers will have to contend with the tax.
People Sending Smaller Amounts
Banks typically charge a flat fee for wire transfers, and that amount can be as high as $50 for one international transaction. In that case, a customer sending $200 might find it’s cheaper to use a different service with lower fees and pay the 1% tax on top of that.
Senders from Oklahoma and Tennessee
Two states have enacted remittance taxes of their own that are charged in addition to the federal tax. Oklahoma, which first approved a tax in 2009, charges $5 for each transfer and an additional 1% on amounts above $500. (Those with a Social Security number or taxpayer ID can claim a tax credit equal to the fee amount.)
Starting on January 1, 2027, senders in Tennessee will be charged $10 per transfer and and additional 2% on amounts above $500.
Other Countries
With a portion of remittance transfers being diverted to the U.S. government, that ultimately means less money flowing to other countries.
What You Should Do If You’re Sending Money Internationally
Open a Bank Account With Favorable Features
If you expect to send money abroad frequently, it may benefit you to find a bank that makes the process easy and affordable. The cost of an international wire transfer can vary significantly among banks, with fees typically ranging from $15 to $50 per transaction. If you don’t want the hassle of going into a branch, make sure you choose a bank that allows you to set up the wire transfer online.
While ACH transfers are generally cheaper than wire transfers, they are more commonly used for moving money within the U.S., although some institutions will allow you to send money to certain countries using ACH.
Shipkevich says some banks will allow noncitizens to open accounts without a U.S. Social Security number. You’ll need to provide alternative forms of ID, such as a foreign passport or driver’s license.
“It’s not that difficult to do even for those here temporarily or here without papers,” he says.
Compare Fees and Exchange Rates
Experts say it’s important to factor in all the costs that may be charged as part of your transaction, including fees, currency conversion costs and tax. Some services may charge a higher fee but offer a favorable exchange rate. Other services may be better for sending money to certain countries.
“Ultimately look at the overall cost,” says Shipkevich.
Try a Digital Money Transfer Service
There are numerous transfer apps and platforms that allow you to send money internationally using your debit card, credit card or a bank transfer. You’ll avoid the 1% tax, and these services can be more convenient and potentially cheaper than sending money directly from your bank. Fees and exchange rates vary depending on the service you use and the country you’re sending money to. You can often get a discount on your first transfer, which could make this an especially good option if you only need to send one payment.
Choose a reputable provider that’s transparent about fees and exchange rates.
Crypto May Gain Popularity
Regular remittance senders may turn to stablecoins and other types of cryptocurrency in the future, especially if the remittance tax were to increase, says Alessandro Rebucci, professor of economics and finance at Johns Hopkins University’s Carey Business School.
Rebucci says one obstacle is that many workers aren’t comfortable or familiar with cryptocurrency, and the effort of ramping up their knowledge combined with the risk of making a costly mistake may not be worth it to avoid a 1% tax. However, he says that if stablecoins gain mainstream popularity, they could provide an effective and cheap method for workers to send money home.
Shipkevich says he thinks the U.S. is overestimating how much revenue the tax will generate specifically because he expects more migrant workers to adopt crypto as their preferred way to send remittances.
“I think in the very near future we are likely to see increased use of stablecoins for remittances that originated in the U.S.,” says Shipkevich. “In the past few months, we have seen major payment networks build out and acquire the infrastructure needed to move seamlessly between traditional USD and crypto payments. Mastercard’s planned acquisition of stablecoin infrastructure provider BVNK, together with Visa’s expansion of USDC settlement and stablecoin partnerships, suggests that stablecoins are moving closer to mainstream cross-border payments.”
Lenhard says his money transfer services are “exploring innovations like stablecoins that have the potential to help preserve value when sending to countries with volatile currencies.”
What to Expect Now the Tax Has Gone Into Effect
Experts say that while the new tax will have an impact on some remittance senders, they don’t expect it to change people’s sending habits.
Rebucci says the 1% tax rate probably isn’t large enough to deter people from sending remittances, and it may not even alter the way many people transfer money at all. However, he says those who regularly send money abroad should keep an eye on whether the tax rate inches upward in future years.
“Once into use, nothing prevents the next Congress or administration from raising those rates because they have not been effective enough,” he says.
