Does the US 1% remittance tax apply to my transfer?

What is the US remittance transfer tax?

It is a federal excise tax of 1% on certain money transfers sent from the United States to recipients abroad. It was added to the Internal Revenue Code as section 4475 by the law known as the One, Big, Beautiful Bill Act, signed on 4 July 2025, and applies to remittance transfers made after 31 December 2025.

The key word is certain. Section 4475(c) limits the tax to transfers where the sender gives the provider cash, a money order, a cashier’s check or another similar physical instrument. Treasury’s proposed regulations of April 2026 would add traveler’s checks to that list and describe the list as exclusive.

Which transfers are exempt?

Section 4475(d) says the tax does not apply when the money being sent is:

1. Withdrawn from an account held at a financial institution covered by US anti-money-laundering rules, such as a bank or credit union account; or
2. Funded with a debit card or credit card issued in the United States.

The proposed regulations also list ACH transfers and personal or business checks among the instruments that do not trigger the tax. Because the taxable list is exclusive, the proposal treats cards issued outside the US as non-taxable too, even though they are not in the statutory exemption.

In practice, if you send money through an app or website and pay from your US bank account or a US card, the tax should not appear. It mainly affects people who walk into an agent location and pay in cash or with a money order.

How much does 1% add, compared with the rest of the cost?

On 500 dollars paid in cash, the tax is 5 dollars. That is not trivial next to the other costs of a transfer. In RateRunner’s snapshot of 15 October 2026, the three best non-promotional quotes for sending 1,000 US dollars to Mexico cost about 1.0% to 1.5% in total (fee plus exchange-rate markup), so a 1% tax on a cash-funded transfer would add roughly as much again.

The tax is a flat percentage, so it does not shrink for larger amounts the way flat fees do. On the other hand, the gap between the cheapest and the most expensive provider in most US corridors is several percentage points: choosing the provider matters more than the tax, but avoiding the tax is the easier saving if you have a bank account or US card. Check current totals in the USD to MXN ledger or the calculator.

Note: the quotes in RateRunner’s data are online prices and do not include the 1% tax, which applies only to the cash-funded transfers described above.

Who collects it and when?

The sender owes the tax, but the provider collects it at the time of the transfer and passes it on. According to the IRS, providers must make semimonthly deposits and file quarterly returns; the first semimonthly deposit was due on 29 January 2026. IRS Notice 2025-55 gave providers relief from deposit penalties for the first three quarters of 2026, provided they meet the notice’s conditions. That relief concerns providers, not senders: it does not change whether the tax is owed.

If a provider does not collect the tax when the transfer is made, section 4475(b)(3) makes the provider liable for the uncollected amount.

What should the receipt show?

US remittance providers already have to give you a pre-payment disclosure and a receipt showing the amount sent, fees, taxes, the exchange rate and the amount the recipient will get, under the CFPB’s remittance transfer rule. Since 2026 the 1% excise tax should appear among the taxes collected by the provider. If you paid by bank account or US card and see the tax, ask the provider to correct it before you pay; the proposed regulations describe a claim-for-refund route through the IRS for tax that was paid but not owed.

Does it apply to money sent to the United States, or between other countries?

No. The tax applies to remittance transfers from a sender in the United States to a recipient in a foreign country, as defined by the US Electronic Fund Transfer Act. Transfers into the US, and transfers that do not involve a US sender, are outside it. Other countries have their own rules; for example, some tax or report incoming remittances, but that is a separate question for the recipient.

Practical takeaways

• If you can, fund the transfer from a bank account or a US-issued card. It removes the tax and is usually cheaper on fees as well.
• If you must use cash, compare providers on the full cost including the 1%: the tax is the same at every provider, so the ranking does not change, but the total does.
• Do not split payments to stay small. The tax has no threshold, so splitting does not avoid it, and structuring cash payments to avoid reporting rules is itself illegal. See transfer limits and ID checks.
• Watch for final rules. The regulations quoted here were proposed in April 2026. If Treasury finalises different definitions, this guide will be updated with the date of the change.

This guide explains public law in plain English and is not tax advice. For your own situation, read the IRS pages linked below or ask a tax professional.