Since January 1, 2026, sending money abroad from the US with cash has cost an extra 1%. The charge is a federal excise tax, and the deciding factor is how you pay the provider: cash, a money order or a cashier's check triggers it, while money drawn from a bank account or charged to a US-issued debit or credit card does not. What follows separates the rules Congress actually passed from the details Treasury has only proposed, adds the state charges that sit on top, and works through the numbers. For fees, exchange rates and delivery options more broadly, start with the money transfer hub.
What is the remittance transfer tax?
It is a 1% federal excise tax on transfers that consumers in the US send abroad after December 31, 2025 and pay for with cash or a similar instrument.
Congress created it in section 4475 of the Internal Revenue Code, part of the 2025 budget law (Public Law 119-21) signed on July 4, 2025. The statute sets the rate and its reach in a single rule: 1% of the amount sent, on transfers paid with cash, a money order, a cashier's check or a similar physical instrument (IRS, as of Nov 1, 2026). Using data from the years before the tax, Treasury estimated that 30% to 36% of the remittances sent through money services businesses were paid for in cash, somewhere between $156 billion and $187 billion a year, so the tax reaches a large share of family transfers even though bank-funded sends escape it.
Its definitions come from the Electronic Fund Transfer Act, the same law behind the disclosure, cancellation and error protections explained in our guide to remittance transfer rights. Under those definitions, a remittance transfer is an electronic transfer that a consumer in the US asks a provider to send to someone in another country, mainly for personal, family or household purposes. A company paying a supplier abroad is outside the tax, and so is a card payment you make directly to a foreign shop or hotel.
Citizenship doesn't enter into it. The version the House first passed set a 3.5% rate and exempted senders whose US citizenship or nationality a qualified provider had verified. The Senate cut the rate to 1%, confined the tax to cash-type payments and dropped the citizen exemption, and that version became law. A US citizen, a green-card holder and a student on a visa who each hand an agent $300 in cash pay the same $3.
Two kinds of transfer stay outside the tax whatever the payment method. Transfers of $15 or less aren't remittance transfers under the federal definitions, and money sent to Puerto Rico, Guam, the US Virgin Islands or another US territory is domestic, because those rules count the territories as states. Nor does the tax touch money you receive; transfers coming into the country are covered in our guide to receiving money from abroad.
Which payment methods are taxed, and which are exempt?
Cash, money orders, cashier's checks and similar physical instruments are taxed; money drawn from a bank account or charged to a US-issued debit or credit card is exempt.
Exempt under the statute: Transfers funded from a bank or other financial-institution account, or with a US-issued debit or credit card. The qualifying accounts are those held at banks, credit unions, thrifts, private bankers, US branches and agencies of foreign banks, and securities and commodities brokers and dealers, all of them institutions subject to Bank Secrecy Act rules. An online transfer from your checking account, a debit the provider's app pulls from your savings and an international wire your bank sends for you all qualify.
The law left two questions open: which other instruments are similar enough to cash to be taxed, and what happens to payment types it doesn't mention. Treasury's proposed regulations answer both, as the right-hand column shows.
| How you pay the provider | The statute | Treasury's April 2026 proposal |
|---|---|---|
| Cash | Taxed | Taxed |
| Money order or cashier's check | Taxed | Taxed, even when bought with money from your bank account |
| Traveler's check | Not named | Taxed |
| A check the provider or its agent cashes, with the cash funding the transfer | Not addressed | Treated as cash, so taxed |
| Personal or business check made out to the provider | Not named | Not taxed |
| Transfer from a US bank, credit union or brokerage account | Exempt | Exempt |
| Debit or credit card issued in the US | Exempt | Exempt |
| Debit or credit card issued outside the US | Not covered by the exemption | Not taxed |
| General-use prepaid card | Not named | Not taxed, unless used in a scheme to avoid the tax |
The last row carries a warning. The proposal lets the IRS disregard or recharacterize transactions carried out mainly to avoid the tax, and both of its examples involve a provider or agent issuing a prepaid card to a customer who pays cash, so that the transfer looks card-funded. Those transfers would be taxed as cash. Treasury also pointed out that prepaid cards usually carry activation, monthly and reload fees that add up to more than 1%, so buying one only to sidestep the tax rarely saves money.
How is the 1% calculated?
Under the proposed rules, it's 1% of the amount delivered to your recipient, bonuses included, with fees, state taxes and the federal tax itself left out.
The statute says only that the tax is 1 percent of the amount of the transfer. The proposal defines that amount as what is ultimately transferred to the designated recipient, whoever pays for it, and says a provider's labels don't control the answer: if money reaches the recipient, it is in the base. A $5 promotional credit added to the payout is therefore taxed, while the provider's service fee never is.
Worked example: $650 to a parent abroad, paid three ways
The same provider charges the same $7.99 fee each time, and $650 is converted for the recipient.
- Cash at an agent counter: tax = $650 × 1% = $6.50, so you pay $650 + $7.99 + $6.50 = $664.49
- A money order handed to the agent: the same $6.50 of tax, plus whatever the money order cost to buy
- Online, debited from your checking account: no tax, so you pay $650 + $7.99 = $657.99
Sending $650 in cash every month adds $6.50 × 12 = $78 a year in federal tax that bank funding avoids.
Worked example: A first-transfer bonus and an Oklahoma state fee
You pay $300 in cash at an agent in Tulsa. The provider adds a $5 first-transfer bonus, so $305 reaches your recipient, and its fee is $3.99.
- Federal tax base: $300 + $5 bonus = $305, so the tax is $305 × 1% = $3.05
- Left out of the base: the $3.99 fee and Oklahoma's charge
- Oklahoma wire transmitter fee: $5.00, the flat amount for transfers up to $500
- Total at the counter: $300 + $3.99 + $3.05 + $5.00 = $312.04
An Oklahoma income tax filer with a Social Security number or other taxpayer identification number can take the $5.00 back as a state tax credit. The $3.05 of federal tax stays paid unless the transfer is canceled.
Timing follows the payment, not the payout. Under the proposal, the tax attaches at the earlier of the moment the provider starts the transfer and the moment you pay, so a transfer paid for on December 31, 2026 and collected on January 2, 2027 belongs to the fourth quarter of 2026. The tax is owed even if the money is never paid out.
Who collects the tax, and how does it reach the IRS?
Your provider adds it to what you pay, deposits it with the IRS twice a month and reports it each quarter on Form 720 as IRS No. 155.
The law makes the sender liable for the tax and the provider responsible for collecting it, and a provider that fails to collect becomes liable itself. The provider is the money transmitter, bank or credit union that runs the transfer. Under the proposal, a grocery store or pharmacy that takes cash on a transmitter's behalf is an agent rather than a provider, so the duty stays with the company behind the counter. The proposal also declines to borrow the consumer rule's exemption for businesses making 500 or fewer transfers a year, which means a small credit union that sends the occasional cash-funded wire would still have to collect.
Deposits began with a first semimonthly deposit due January 29, 2026, and Form 720 is due by April 30, July 31, October 31 and January 31 for the quarter just ended. Because providers had to build collection systems in a hurry, the IRS waived failure-to-deposit penalties for those who deposit on time, even with a miscalculated amount, provided any shortfall is paid with the quarterly return. Notice 2025-55 gave that relief for the first three quarters of 2026, and Notice 2026-52 extended it to every semimonthly period before final regulations apply.
For senders there is nothing to file. The tax should appear beside the fee on the disclosure you see before paying and on your receipt, which lets you confirm that a transfer funded from your bank account wasn't charged it.
Which parts are law and which are only proposed?
The rate, the start date, who pays and the taxed and exempt payment methods are law; the tax base, the check and card details and refunds are only proposed.
| Rule | Where it comes from | Status on November 2, 2026 |
|---|---|---|
| 1% rate on transfers made after December 31, 2025 | Section 4475 and the 2025 law's effective-date provision | Law |
| Sender liable, provider collects and is liable if it doesn't | Section 4475 | Law |
| Cash, money orders, cashier's checks and similar instruments taxed | Section 4475 | Law |
| Bank-account and US-issued card funding exempt | Section 4475 | Law |
| Quarterly Form 720 returns with semimonthly deposits | Existing excise tax rules and IRS guidance | In effect |
| Tax measured on the amount delivered, bonuses included | Proposed regulations | Proposed |
| Traveler's checks and provider-cashed checks taxed | Proposed regulations | Proposed |
| Personal checks, prepaid cards and foreign-issued cards untaxed | Proposed regulations | Proposed |
| Tax attaches at payment or initiation, whichever comes first | Proposed regulations | Proposed |
| Sender may claim a refund from the IRS after a cancellation | Proposed regulations | Proposed |
Treasury and the IRS published the proposal on April 13, 2026 and accepted comments until June 12, 2026. As drafted, the final rules would apply from the first calendar quarter that starts after they're published, and until then providers and senders may rely on the proposal as long as they follow all of it consistently. A final version could still change any of the proposed rows, which is why the table carries a date.
Can you get the tax back if a transfer is canceled?
Possibly, but under the proposal the refund comes from the IRS rather than the provider, because the tax attaches when you pay.
The proposed rules treat the tax as due once a transfer is made, whether or not the money is ever paid out. If the transfer is then canceled or expires and the provider returns the transfer amount, you may file a claim with the IRS for the tax; the provider, which only collected it, has no refund claim of its own.
That sits awkwardly beside the federal cancellation right, which lets you cancel for up to 30 minutes after paying, for a full refund. Regulation E says that refund includes fees and, to the extent the law allows, taxes, so a provider may hand back the transfer amount and its fee while pointing you to the IRS for the 1%. Keep the receipt and ask for written confirmation of the cancellation, since together they show what you paid and that the money never went out. The cancellation steps are in our remittance transfer rights guide.
Do states charge their own remittance taxes?
Three states do or plan to: Oklahoma charges a fee at agent locations, Nebraska taxes transfers to four countries at 25%, and Tennessee's 2027 tax is on hold.
| State | Charge | What it applies to | Status |
|---|---|---|---|
| Oklahoma | $5 up to $500; $5 plus 1% of the amount above $500 | Transfers started at a licensed money transmitter's location or one of its agents | In force since 2009; filers with an SSN or taxpayer ID can claim a matching state income tax credit |
| Nebraska | 25% of the amount sent | Transfers by state-licensed money transmitters to residents of China (including Hong Kong and Macau), Iran, North Korea and Russia | In force since July 1, 2026, with quarterly returns |
| Tennessee | $10 per transfer plus 2% of the amount above $500 | Transfers sent abroad by state-licensed money transmitters; banks without that license are exempt | Set to start January 1, 2027, but an August 2026 court order blocks enforcement until a final ruling |
Nebraska's country list follows the foreign adversaries named in Commerce Department rules as of January 1, 2026, minus Cuba and Venezuela, and active-duty service members charged in error can ask for an expedited refund. Tennessee's notice says a transfer requested online or by phone counts as sent from Tennessee when the provider's records, such as the customer's home or account address, place the customer in the state, and that a 45-day grace period would follow if the law survives the court challenge.
State charges come on top of the federal 1% and don't reduce it, since the proposal keeps state taxes out of the federal base. Start a $1,200 cash transfer at an Oklahoma agent and you pay $5 + ($700 × 1%) = $12 to the state and $1,200 × 1% = $12 in federal tax. Tennessee's levy would weigh most on small transfers: $10 on a $400 send is 2.5% before any provider fee, while $800 would cost $10 + ($300 × 2%) = $16.
How can you keep a transfer outside the tax?
Fund it electronically: money drawn from a US bank or credit union account, or a payment with a US-issued debit or credit card, keeps a transfer outside the tax.
Ways to send without the 1%
- Link your checking or savings account in the provider's app or website instead of paying at the counter
- At an agent location, ask whether you can pay by debit card, since the exemption turns on how you pay, not where
- Before paying by credit card, check whether your card issuer treats the transfer as a cash advance, with fees and interest that can cost more than 1%
- Skip money orders and cashier's checks as funding, because they're taxed even if you bought them with money from your account
- Don't split cash into smaller transfers: the rate is flat, so splitting saves nothing
Keep the 1% in proportion, though. On a $500 transfer the tax is $5, while an exchange-rate markup of 2% costs $10, and the markup applies however you pay. Comparing what your recipient actually receives usually matters more than the tax, and our guides to exchange-rate markups and the cheapest way to send money abroad show how to do it. Corridor guides such as sending money from the US to Mexico compare payout options route by route. Large gifts to family raise separate questions, covered in gift tax on money sent abroad, while money that comes the other way can call for Form 3520, and accounts you keep abroad to stage transfers may need an FBAR.
The money transfer cost calculator runs the fee-plus-markup arithmetic for a single quote; its labels use pounds and rupees, but the math is the same for dollars.
These rules are new and still moving. The federal regulations aren't final, and state legislatures keep adding measures of their own, so check the current position before a large cash-funded transfer. If you send money abroad for a business, or your situation doesn't match the examples here, a tax professional can tell you how the rules apply to you.