What is the OBBBA 1% remittance tax?

It's a new federal excise tax under IRC Section 4475, created by the One Big Beautiful Bill Act, equal to 1% of the amount of certain international money transfers. It took effect for transfers made after December 31, 2025 — so from January 1, 2026. The transfer provider collects and remits it.

Which money transfers are exempt from the 1% remittance tax?

Transfers funded from a US bank account, or paid with a US-issued debit or credit card, are exempt. The tax only applies when the sender hands over cash, a money order, a cashier's check, or a similar physical instrument to the transfer provider. So most ordinary app- or bank-based transfers escape it entirely.

How much was the remittance tax originally going to be?

Earlier versions of the bill proposed rates as high as 5%, later trimmed to 3.5%, before the final law settled on 1%. So the enacted tax is far lighter than the headline figures that circulated while the bill was being debated.

Does the 1% tax apply to transfers within the United States?

No. It targets remittance transfers sent abroad. Domestic transfers are not subject to the excise tax. The mechanism mirrors existing remittance-transfer rules, which are built around cross-border consumer transfers.

Buried in the OBBBA: A 1% Tax on Money You Send Abroad — and the Easy Way Around It.

The Tax Almost Nobody Saw Coming

Tucked deep inside the One Big Beautiful Bill, past the standard deduction changes and the no-tax-on-tips headlines, is a brand-new federal excise tax that didn't exist a year ago: a 1% levy on money sent out of the country. It's IRC Section 4475, and it's been live since January 1, 2026.

Here's the thing most coverage got wrong in the panic phase. While the bill was being debated, the proposed rate was as high as 5%, then 3.5%, and the framing was apocalyptic — a tax that would hammer every immigrant wiring money home. The version that actually became law is 1%, and it has a carve-out so wide that the typical person sending money abroad will never pay a cent. The design matters far more than the rate.

So let's separate the scary version from the real one.

§ 01What's Actually Taxed

The 1% tax applies only to remittance transfers where the sender funds the transfer with a physical instrument:

Cash handed over the counter
A money order
A cashier's check
Any similar physical payment instrument

If you walk into a money-transfer storefront, hand the clerk $1,000 in cash to send to a family member abroad, the provider adds $10 of excise tax. That's the transaction the law is built around — the cash-based, walk-in remittance.

The 1% is on the transfer amount, not a tax on income. There's no bracket, no threshold, no deduction. One percent of whatever crosses the counter in cash form, headed overseas.

§ 02What's Exempt — the Loophole That's the Whole Game

This is the part that defangs the tax for most people. Transfers funded from a US bank account, or paid with a US-issued debit or credit card, are exempt.

Read that again, because it covers almost everything a typical person does. Send money through your bank's wire service — exempt. Use an app that pulls from your checking account — exempt. Pay with your US debit card — exempt. The tax bites only when the funding source is physical cash or a paper instrument handed to a provider.

In effect, the law taxes the unbanked and the cash economy, and exempts anyone routing money through the formal banking system. Whether that's good policy is a fair debate — it arguably falls hardest on the people least able to absorb it. But from a pure "will this cost me money" standpoint, anyone who funds transfers electronically from a US account simply isn't in scope.

§ 03Who Actually Pays It

Strip away the noise and the population that actually pays the 1% is fairly specific:

Cash-based senders — people who walk into a money-transfer agent with physical cash, often because they don't have a US bank account or prefer cash for other reasons.
The unbanked and underbanked — disproportionately lower-income households and recent immigrants, exactly the demographic that relies most on storefront remittance services.
Money-order and cashier's-check senders — a smaller group, but in scope.

The people not paying it: anyone with a US bank account who sends electronically, anyone using a card, and — importantly for readers of this site — most expats and digital nomads, who almost universally move money through bank-linked apps and online providers rather than cash.

§ 04How It Gets Collected

You don't file anything for this. The obligation sits on the remittance transfer provider — money transmitters, foreign-exchange services, and the retailers and convenience stores that offer wire services. They collect the 1% at the point of transfer and remit it to the IRS on Form 720, the quarterly federal excise tax return.

Because the rules landed fast, the IRS granted limited penalty relief: for the first three quarters of 2026, providers who make timely deposits — even if they calculate the amount imperfectly — and settle any shortfall by the quarterly return due date are treated as having reasonable cause and avoid failure-to-deposit penalties. That's a transition cushion for the providers, not a holiday on the tax itself; the 1% still applies to taxable transfers from day one.

§ 05How to Avoid It, Legally

This isn't aggressive tax planning — the exemption is written into the statute. If you currently send cash and want to stay out of the 1%, the move is straightforward:

Fund transfers from a US bank account or card. Electronic funding from a US account is exempt by design. This single change takes most senders out of scope.
Use a bank-linked transfer app rather than a cash storefront. The same $1,000 sent from a linked checking account carries no excise tax, where $1,000 in cash over the counter does.
Open a US bank account if you're unbanked. Easier said than done for some, but it's the structural fix — it moves you from the taxed cash channel to the exempt electronic one and usually cuts fees too.
Watch the total cost, not just the tax. A storefront might charge a flat fee plus a poor exchange rate that dwarfs the 1%. The exchange-rate spread is often the bigger cost; choosing a mid-market-rate provider can save more than the tax itself.

For the wider expat money picture, the expat filing deadlines guide covers the FBAR and reporting obligations that come with moving money across borders, and the digital nomad tax guide looks at where remote income is actually taxed. The full bill breakdown lives in our OBBBA explainer.

§ 06Key Takeaways

A new 1% excise tax (IRC Section 4475) on international money transfers took effect January 1, 2026 under the OBBBA.
It only hits physical-instrument funding — cash, money orders, cashier's checks handed to a transfer provider.
Transfers funded from a US bank account or US-issued debit/credit card are exempt — which covers most ordinary electronic transfers.
The burden falls on cash-based and unbanked senders; expats and nomads using bank-linked apps are largely out of scope.
The rate was nearly 5×. Proposed at up to 5%, trimmed to 3.5%, enacted at 1%.
Providers collect and remit it on Form 720, with limited penalty relief for the first three quarters of 2026.
Avoiding it is legal and simple: fund transfers electronically from a US account rather than with cash.

Disclaimer: Provisions are drawn from the One Big Beautiful Bill Act, IRC Section 4475, the IRS penalty-relief notice for remittance transfer providers, and analysis by RSM, Crowe, and Cherry Bekaert. This article is informational and is not tax, legal, or financial advice. Consult a qualified tax professional about your specific situation.