Starting January 1, 2026, the United States will implement a new 1% tax on international money transfers made using cash-based methods. Signed into law by former President Donald Trump, the measure targets remittances sent via cash, money orders, cashier’s checks, or other physical payment systems identified by the U.S. Treasury Secretary.
The law aims to increase federal revenue and improve oversight of unregulated cash flows, with estimates projecting an annual tax income of $10 billion.
Transfers using U.S.-issued debit or credit cards, or money from bank accounts that follow anti-money laundering rules, are exempt from the new tax.
The originally proposed rate of 3.5% was reduced to 1% during negotiations to lessen the impact on lower-income households and migrant workers.
In 2024, low- and middle-income countries received an estimated $685 billion in remittances. This money supports basic needs like food, education, healthcare, and housing. For millions of families, it is their only stable source of income.
A 1% tax might seem small, but for someone sending $1,000, that’s an extra $10 per transfer. When added to the average remittance cost,already at 6.2% globally,it makes sending money home even more expensive. In many cases, this pushes senders to use informal or riskier channels.
This new tax could widen the financial gap. It may reduce the money families receive, delay crucial expenses like school fees or medical bills, and discourage legal remittance flows,hurting both the senders and their home countries’ economies.
Governments and financial institutions will need to step up efforts to educate users, expand access to low-cost digital options, and safeguard the flow of funds that millions depend on every day.
The law aims to increase federal revenue and improve oversight of unregulated cash flows, with estimates projecting an annual tax income of $10 billion.
Who Will Be Affected?
The tax will apply to all individuals,citizens and non-citizens,who send money abroad using cash or similar methods like Western Union. Remittance providers, such as money transfer companies, must collect the tax at the point of transaction and transfer it to the U.S. Treasury on a quarterly basis. If they fail to collect the tax, they are still liable to pay it.Transfers using U.S.-issued debit or credit cards, or money from bank accounts that follow anti-money laundering rules, are exempt from the new tax.
The originally proposed rate of 3.5% was reduced to 1% during negotiations to lessen the impact on lower-income households and migrant workers.
Why This Matters Globally
Remittances are a lifeline for many families around the world. In more than 50 countries, remittances account for over 10% of their national GDP, according to World Bank data. These flows often surpass foreign aid and foreign direct investment.In 2024, low- and middle-income countries received an estimated $685 billion in remittances. This money supports basic needs like food, education, healthcare, and housing. For millions of families, it is their only stable source of income.
A 1% tax might seem small, but for someone sending $1,000, that’s an extra $10 per transfer. When added to the average remittance cost,already at 6.2% globally,it makes sending money home even more expensive. In many cases, this pushes senders to use informal or riskier channels.
The Bigger Picture
While digital financial tools and mobile wallets are growing, many migrant workers and their families still rely on cash-based transfers. Reasons include lack of banking access, digital illiteracy, and trust in informal systems.This new tax could widen the financial gap. It may reduce the money families receive, delay crucial expenses like school fees or medical bills, and discourage legal remittance flows,hurting both the senders and their home countries’ economies.
Governments and financial institutions will need to step up efforts to educate users, expand access to low-cost digital options, and safeguard the flow of funds that millions depend on every day.
