On July 4, 2025, the One Big Beautiful Bill Act was signed into law. One of the provisions in the bill was called the remittance tax, which could also be referred to as an excise tax. This summary aims to clarify how this new tax could impact Americans abroad.
What is a remittance or excise tax?
In this context, a remittance refers to the transfer of money from the United States to another country, and an excise tax is a tax imposed on that transaction — meaning it taxes the act of sending money abroad. The United States sends the most international remittances in the world with $79.5 billion sent abroad in 2022.
Where did the tax come from?
In 2009, Oklahoma enacted a fee on remittance transfers in an attempt to curb drug cartels from sending money to Latin America. On a federal level, several bills to impose such a tax have been introduced in Congress since 2017, though none have passed. The current remittance tax was initially introduced as its own bill in 2022 by Congressman Kevin Hern (OK-01) in the 117th Congress, having seen Oklahoma’s remittance tax collect $13.2M in tax in 2018. The bill was then reintroduced by Congressman Hern in 2023, with a Senate companion bill introduced by then Senator J.D. Vance (OH). In 2022, the bill put the tax at 5%, but the bill reintroduced in 2023 raised the tax to 10%.
A modified version of the 2023 remittance tax made its way into the One Big Beautiful Bill Act as passed by the House on May 18, 2025. The House version of the remittance tax was a 3.5% tax on remittance transfers with a carve out for U.S. citizens. The bill then went to the Senate and underwent another round of modifications, including reducing the tax to 1%, applying it only to cash transfers, and applying it to everyone regardless of citizenship. This is the version that went back to be voted on by the House and was signed into law by the President.
What is the intent of the remittance tax?
The remittance tax is intended to stop illegal drug and human trafficking money from being sent abroad. The United States is not the first country to consider or implement a remittance tax; however, the effectiveness of a remittance tax is questionable in the first place, given remittance taxes are historically short-lived. Estimates are the remittance tax will collect over $9B in the next 10 years, but this is just an estimate and not a guarantee.
How will this tax impact Americans abroad?
Clearly, the law is not aimed at Americans abroad; however, this isn’t the first time that laws intended for one purpose impact the American-abroad population given we were not considered during the drafting of the bill. As drafted, the tax will only apply to cash transfers from the United States to another country. For the majority of Americans abroad, we use bank wire transfers, third-party transfer companies like WISE, or transfer directly from our U.S. bank account to our non-U.S. bank account so theoretically, this tax will not impact the majority of transfers made by U.S. citizens living abroad.
When does the tax start?
January 1, 2026.
What kind of transfers does the 1% remittance tax apply to?
Any money transferred from the United States to another country using “cash, a money order, a cashier’s check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider.” For example, cash sent from a Western Union or MoneyGram office.
What kind of transfers will not get hit with the 1% remittance tax?
Anything that is not a cash transfer, which includes transfers from your U.S. bank account, retirement account, brokerage account, online, or using a debit or credit card. Below are some examples. This list isn’t exhaustive.
- Initiating an international wire transfer from your U.S. bank to your non-U.S. bank account.
- Transferring your Social Security, 401(k), or IRA distributions from your U.S. bank to your non-U.S. bank account.
- Using WISE, Revolut, or any other online money transfer service to transfer money from the U.S. to your country of residence.
I thought the tax was at 3.5%, not 1%?
The House version of the bill was at 3.5%, but the Senate version changed it to 1%. The final number in the bill passed into law and signed by the President is 1%.
I thought the tax applied to non-U.S. citizens only?
In the House version of the bill, the tax applied to non-U.S. citizens only. The Senate changed it to apply to everyone.
What about cryptocurrency?
We are unsure if the tax will apply to cryptocurrency transfers. The legislation says that the tax will apply to “cash, a money order, a cashier’s check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider.” We are waiting for the IRS to issue regulations to see how they interpret the “or any other similar physical instrument” language in the bill.
How do we know for sure that this tax won’t hit Americans abroad?
In short, we don’t. For the moment, we are relying on the strict reading of the legislation and conversations on the intent of the bill that we’ve had with Congressional offices over the last few months. We are waiting for the IRS to issue regulations to ensure remittance transfer providers have the guidance required to collect and pay the tax appropriately. The IRS usually releases proposed regulations that the public can provide feedback for in advance of a law going into effect, and we anticipate this comment period to happen sometime before the end of the year. When that happens, we will encourage Americans abroad to write to the IRS to ask that there will be no unintended consequences for Americans abroad as a result of this new law.
What can I do to help ensure that Americans abroad won’t be hit by the 1% tax when it kicks in next year?
Sign up for the Taxation Task Force mailing list, and we’ll notify you when and how to write to the IRS once they launch their open comment period on the remittance tax.
References
- https://blogs.worldbank.org/en/peoplemove/why-taxing-remittances-bad-idea
- https://worldmigrationreport.iom.int/what-we-do/world-migration-report-2024-chapter-2/international-remittances
Note: The two articles below were referenced but contain outdated information since they were written before the final bill passed.