The New 1% Remittance Tax: What Americans Living Abroad Need to Know

A new 1% US remittance tax took effect on January 1, 2026, but it does not apply to every international money transfer.

For Americans living abroad, that distinction matters. At first glance, “remittance tax” can sound like another charge on simply moving money between the US and another country. In reality, the rule is much narrower. It mainly depends on where the transfer starts and, more importantly, how the sender pays for it.

What Is the New 1% Remittance Tax?

The new remittance transfer tax is a 1% federal excise tax on certain qualifying transfers sent from the United States to recipients in foreign countries.

Congress created the tax under Internal Revenue Code Section 4475, and it applies to qualifying remittance transfers occurring after December 31, 2025. The sender is responsible for the tax, while the remittance transfer provider generally collects it as part of the transaction.

So, say someone sends US$2,000 from the US using a taxable funding method. The remittance tax would be US$20.

This is separate from regular US income tax. It is an excise tax attached to a particular type of money transfer, rather than a tax on the income being sent.

Which International Money Transfers Are Subject to the 1% Tax?

The key question is not simply, “Are you sending money overseas?” It is, “How are you funding the transfer?”

Under Section 4475, the tax applies when the sender funds a qualifying remittance using cash, a money order, a cashier's check, or another similar physical instrument. Proposed IRS regulations issued in April 2026 also include traveler's checks in the taxable category.

By contrast, the law generally excludes transfers funded by withdrawals from qualifying financial accounts or by US-issued debit or credit cards. The proposed regulations go somewhat further, indicating that personal and business checks and general-use prepaid cards generally would not trigger the tax, subject to anti-avoidance rules.

How the transfer is funded	1% remittance tax
Cash	Generally applies
Money order	Generally applies
Cashier's check	Generally applies
Qualifying bank account withdrawal	Generally does not apply
US-issued debit card	Generally does not apply
US-issued credit card	Generally does not apply

The difference might seem oddly specific, but it is intentional. The tax is not a blanket 1% charge on money crossing the US border.

Does the 1% Remittance Tax Affect US Expats?

Living overseas does not automatically make you subject to the tax. A US citizen living in Australia, for example, might routinely transfer savings from a US bank account to an Australian account. If that transfer is funded directly from a qualifying financial account, the new tax generally would not apply.

The rule becomes more relevant when a remittance originates in the US and someone uses one of the taxable physical payment methods. Perhaps a relative in California pays cash to a remittance provider to send US$1,500 to a family member living overseas. Assuming the transaction otherwise qualifies, the 1% tax would be US$15.

That is why discussions about the remittance tax for Americans abroad need some context. Citizenship alone does not trigger it.

How Much Could the Remittance Tax Cost?

At 1%, the calculation itself is straightforward. A US$500 taxable remittance creates a US$5 tax. A US$5,000 transfer means US$50, while a US$10,000 qualifying transfer results in US$100.

However, that may not be the sender's total cost. Remittance providers can still charge transfer fees, and currency conversion margins may affect how much ultimately reaches the recipient.

In other words, switching payment methods purely to avoid a US$10 tax may not always produce the cheapest transaction overall. Comparing the full cost makes more sense.

Can You Choose a Transfer Method That Is Not Subject to the Tax?

In many cases, yes. Someone planning to send money from the US could check whether the provider allows the transaction to be funded directly from a bank account or through an eligible debit or credit card rather than cash or another taxable physical instrument.

That is not exploiting a loophole. The law itself distinguishes between taxable and non-taxable funding methods.

Still, providers may differ in how they process transactions, so confirming how a particular transfer will be funded is sensible before assuming the tax will not apply.

Does the New Remittance Tax Change Your US Expat Tax Obligations?

No. The remittance tax does not replace or rewrite the normal US tax rules for Americans living overseas. US citizens and resident aliens abroad generally remain subject to US tax rules on worldwide income and may still have annual federal filing obligations. Depending on their circumstances, they may qualify for provisions such as the Foreign Earned Income Exclusion or Foreign Tax Credit.

For someone filing a 2025 US tax return in 2026, the new remittance tax should therefore be viewed separately. It applies to qualifying transfers beginning January 1, 2026, rather than changing how income from the 2025 tax year is reported.

For most Americans abroad, the practical takeaway is fairly simple: before worrying about a new 1% charge every time money moves internationally, look first at where the transfer starts and how it is funded.