If you’re looking to send money overseas from the US, take note: a new incoming US remittances tax signed into law last month could make it pricier to send money abroad.
Last month, US President Donald Trump signed into law the Big Beautiful Bill, which will add a 1% remittance tax to transfers being made with cash, money orders, cashier’s checks or similar instruments, starting from 1 January 2026.
With total remittances being sent from the US amounting to over $98bn in 2024, transfers out of the region are a key lifeline to countries around the world, particularly countries in Latin America such as Mexico as well as India and China.
Below, we explain more about the tax, as well as how you can save money on transfers to help mitigate the impact.
What is a remittances tax?
When you send money abroad from any country, you are making what’s called a remittance. A tax on remittances essentially adds an additional amount to pay on top of the other costs that you would expect to pay for a transfer; this can include a straight fee for the transfer or an FX margin – i.e. the amount that the money transfer provider charges overall for the transfer.
The US hasn’t had a nationwide tax on federal remittances before – but that’s set to change due to the new bill. That’s why some people making a transfer can expect to see a new tax being added to their bill when they go to make a remittance.
What is the US remittances tax and who pays it?
The US remittances tax was one of many legislative changes introduced in the US’s One Big Beautiful Bill Act, also known as the Big Beautiful Bill. The country has tried to bring in remittance taxes several times in the past, at both a state and federal level, but most of them haven’t passed into law.
When this new bill was first proposed, the tax was going to be 5% and covered all remittances except those being sent by US citizens and US nationals. However, this has now been scaled down, with a 1% tax only being applied to money transfers made with cash and checks.
The US’s goal appears to be to target undocumented migrants, many of whom get paid (and therefore make remittances) in cash – but the bill could also affect other groups who are US nationals, including some minority groups or the elderly.
If, however, you are sending a money transfer through an electronic funds method – such as through a wire transfer, through an app or directly from your bank account – or you are funding the transfer with a US debit or credit card, you will not be subject to the tax.
Who will the US remittances tax affect?
In short, the remittances tax will mainly affect the following people:
- Immigrant workers who are sending money to family members or friends in foreign countries – in particular Latin America, Africa and Asia.
- Undocumented immigrants, who may not have access to legal banking options and often use remittance services.
- US citizens and legal US residents who use cash and other checks to make transfers.
- Family members or friends living abroad, who may receive lower transfer amounts as a result of the increased costs.
Note that the tax only applies to outbound remittances from the US. Transfers coming into the US will not have the tax applied.
What should I do if I send remittances from the US?
Whether you regularly make money transfers abroad or send a large lump sum every now and again, there are a few things that you can do now to help offset the effects of this new tax.
Think about how you are funding money transfers abroad
If you currently use cash, checks or money orders to make transfers, you will be taxed an additional amount on top of the money you are already spending to make the transfer.
Instead, think about whether you can use alternative methods to fund payments, such as through cards or bank accounts. A wide range of money transfer providers online offer a variety of ways to pay to transport your money from A to B.
Stay informed on money transfer laws and exchange rates
The bill has now passed into law, but this isn’t to say that the remittances tax will be around forever.
A number of civil rights groups and financial groups advocated against any form of remittance tax prior to its passing, and opposition will likely continue into the future.
If you’re sending money regularly and already dealing with the cost of exchanging to a different currency or high bank fees, making sure you keep up with how the cost of transfers is changing – as well as exchange rates – could help when making a transfer.
Compare money transfer providers on your chosen transfer
Now more than ever, it’s important to remember that not every provider charges the same amount for transfers, and you could be paying significantly more than you need to in order to send money across borders.
With FXcompared, you can quickly compare the cost of a money transfer from the US to another country across a number of well-trusted, authorised money transfer providers. Use our money transfer comparison tool to find the best possible deal for your transfer.
