At a Glance
Beginning January 1, 2026, certain money transfers sent from the United States to recipients in foreign countries may be subject to a new 1% federal excise tax. The tax generally applies to cash-funded remittance transfers, rather than all outbound payments or transfers.
The tax may affect individuals, families, and businesses that send funds abroad through covered money-transfer services. Transfers funded through certain compliant financial institutions or U.S.-issued debit or credit cards may qualify for an exception.
Key Takeaways
- Beginning January 1, 2026, certain cash-funded remittance transfers from the United States to foreign recipients may be subject to a 1% federal excise tax.
- The tax is not limited to noncitizens or undocumented immigrants; U.S. citizens and residents may also be affected, depending on how funds are transferred.
- Transfers funded from accounts at certain financial institutions that meet recordkeeping and reporting requirements may be exempt.
- Transfers made using a debit card or credit card issued in the United States may also be exempt.
- Money service businesses generally will collect the tax at the point of transfer and remit it to the U.S. Treasury.
Who Is Affected
The new tax may affect individuals and businesses that send money from the United States to recipients in foreign countries through covered remittance systems.
Potentially affected taxpayers include:
- Immigrants sending money to family members in their home countries
- Dual nationals and expatriates supporting foreign dependents
- Americans providing financial gifts to relatives abroad
- Small business owners paying foreign vendors through cash-based transfer services
- Other U.S. residents or citizens sending cash-funded transfers abroad
Eligibility and Key Requirements
Eligibility Requirements
The tax generally applies to certain cash-funded remittance transfers sent from the United States to recipients in foreign countries.
Covered remittance systems may include:
- Money-transfer businesses
- Prepaid debit-card reload services
- Mobile payment applications with international transfer functionality
The tax is intended to be collected by the money service business facilitating the transfer.
Limits, Thresholds, and Phaseouts
The excise tax rate is 1% of a covered remittance transfer.
The article does not identify a minimum transfer amount, annual dollar limit, income threshold, or phaseout.
Exclusions and Special Rules
The excise tax does not apply when transferred funds are:
- Taken from an account at certain financial institutions that comply with applicable recordkeeping and reporting requirements, including U.S. banks, credit unions, broker-dealers, or U.S. branches or agencies of foreign banks that meet those requirements
- Provided using a debit card or credit card issued in the United States
The tax applies to certain remittance transfers and does not apply to all payments or transfers sent outside the United States.
U.S. citizens may be eligible for a credit or refund only if the transfer is made through a qualified provider and appropriate documentation is filed with the IRS.
Documentation and Reporting
The article anticipates new or enhanced reporting requirements, which may include:
- Additional disclosure on Form 1040 or in connection with FBAR or FATCA filings
- Reporting of outbound transfers by third-party remittance platforms
- Greater IRS scrutiny of gift reporting and foreign trust distributions
Taxpayers should retain records supporting:
- The transfer date and amount
- The recipient and destination country
- The transfer provider used
- The funding source for the transfer
- Whether a debit or credit card was used
- Whether funds came from a qualifying financial institution account
- Any tax withheld, credit claimed, or refund requested
Effective Dates
The 1% federal excise tax on certain remittance transfers takes effect January 1, 2026.
The article does not identify an expiration date for the tax.
Planning Considerations
Individuals and businesses that regularly send money abroad should review how their transfers are funded and the type of provider used. The funding source may determine whether a transfer is subject to the excise tax.
Taxpayers should consider whether transfers can be funded from an account at a qualifying financial institution or through a U.S.-issued debit or credit card. They should also confirm that the provider maintains the required records and reporting procedures.
Businesses making payments to foreign vendors through cash-based services should review their payment processes and maintain clear records of each transfer. Individuals making gifts or providing financial support to foreign family members should also retain documentation in case additional reporting or a credit or refund claim is required.
Example
An individual sends money from the United States to a family member living in another country through a cash-funded money-transfer business. Because the transfer is made through a covered remittance system and is cash funded, the transfer may be subject to the 1% excise tax.
In contrast, if the individual funds the transfer from an account at a qualifying financial institution that meets applicable recordkeeping and reporting requirements, the transfer may qualify for an exception to the excise tax.
Next Steps
- Review existing processes for sending funds to recipients outside the United States.
- Identify whether transfers are cash funded, funded through qualifying financial institution accounts, or made using U.S.-issued debit or credit cards.
- Confirm that remittance providers maintain appropriate documentation and reporting procedures.
- Retain records for all outbound remittance transfers, including any tax withheld and documentation supporting an exception, credit, or refund claim.
For additional information about the remittance transfer excise tax and how it may affect your cross-border transfers, contact your RKL advisor.
Frequently Asked Questions
Who may be affected by the remittance tax?
The tax may affect U.S. residents, citizens, immigrants, dual nationals, expatriates, small business owners, and others who send certain cash-funded money transfers from the United States to foreign recipients.
What is the tax rate?
The excise tax is 1% of a covered remittance transfer.
When does the tax apply?
The tax takes effect January 1, 2026, and generally applies to certain cash-funded remittance transfers sent from the United States to foreign countries.
What transfers may be exempt?
Transfers funded from accounts at certain qualifying financial institutions may be exempt. Transfers made with a U.S.-issued debit card or credit card may also be exempt.
What records should be retained?
Taxpayers should retain records showing the amount, date, recipient, funding source, transfer provider, and any tax withheld. Documentation may also be needed to support a credit or refund claim.
