The New 1% U.S. Remittance Tax in 2026: What Every Expat, Digital Nomad, and Mobile Professional Needs to Know

On July 4, 2025, the One Big Beautiful Bill Act became law. Buried in Section 70604 of that 1,100-page bill is a new provision, IRC Section 4475, that imposes a 1% federal excise tax on certain outbound remittance transfers from the United States to foreign countries.

The United States is the largest remittance-sending country in the world. According to World Bank data, Americans sent over $79 billion abroad in 2022 alone.^[1] Globally, remittances hit $905 billion in 2024.^[2] The Congressional Budget Office estimated this new 1% tax would generate $9 to $10 billion over 10 years, though the actual impact depends entirely on how many senders switch to exempt digital methods.

Here is the critical nuance most people miss: this is not a tax on all international money transfers. It is a tax on a specific funding method: cash and cash-equivalent instruments. Understanding that distinction is the difference between paying the tax and not paying it.

The Legislative Journey

The tax went through dramatic changes before becoming law:

Version	Proposed Rate	Key Difference
Original House proposal	5%	Applied to all remittances; included reporting requirements
Revised House version (May 2025)	3.5%	Included refundable tax credit for U.S. citizens
Senate amendment	1%	Removed tax credit; exempted bank/card-funded transfers
Final law (July 4, 2025)	1%	Cash-funded only; no citizen credit; no deduction

The Senate's changes fundamentally altered who this tax actually affects. By exempting bank-funded and card-funded transfers, the final law effectively targets unbanked senders: people who rely on cash to send money abroad because they do not have (or cannot maintain) a U.S. bank account.

That is a critical insight if you are an expat or digital nomad: your U.S. banking relationship is now a tax shield.

What Triggers the 1% Tax (And What Does Not)

This is the section you will want to bookmark. The law is specific about what counts and what does not.

Transfers That ARE Taxed (1% Excise)

The tax applies when all three conditions are met:

1. A sender located in the United States
2. Sends money to a recipient in a foreign country through a remittance transfer provider
3. AND funds the transfer with cash, a money order, a cashier's check, or a similar physical instrument

Real-world examples of taxable transfers:

• Walking into a Western Union or MoneyGram location and handing over cash to send $500 to family in Mexico
• Purchasing a money order at a post office to fund an international transfer
• Using a cashier's check to fund an outbound transfer through a remittance provider
• Loading cash onto a foreign-issued prepaid card for use abroad

Transfers That Are NOT Taxed (Exempt)

These transfers are fully exempt under Section 4475(d):

Transfer Method	Taxed?	Why
ACH transfer from U.S. bank account	NO	Bank account withdrawal exemption (BSA)
Wire transfer from U.S. bank account	NO	Bank account withdrawal exemption (BSA)
Wise/Remitly/PayPal funded from bank account	NO	Bank account withdrawal exemption
U.S.-issued debit card payment	NO	Debit card exemption
U.S.-issued credit card payment	NO	Credit card exemption
Venmo/Zelle to foreign recipient (from bank)	NO	Bank-funded digital transfer
Apple Pay / Google Pay (linked to U.S. bank)	NO	Digital wallet exemption
U.S.-issued prepaid card	NO	Card exemption
Domestic transfers (U.S. to U.S.)	NO	Only international transfers are covered
Inbound transfers (foreign country to U.S.)	NO	Only outbound transfers are covered
International transfers of $15 or less	NO	Small transfer exclusion
Credit union member transfers (from account)	NO	BSA-regulated institution exemption

The Key Principle

If your money leaves a U.S. bank account electronically, you do not pay. If you hand cash to a transfer agent, you pay 1%.

For most expats, digital nomads, and remote workers who already use Wise, Remitly, PayPal, or direct bank transfers, you are already exempt. The tax primarily impacts people who use cash-based transfer services because they do not have U.S. bank accounts.

But here is where it gets relevant for mobile professionals: banks are closing accounts for Americans who cannot verify a U.S. residential address. If you lose your bank account, you lose your exemption. Maintaining a legitimate Florida residential address is not just about domicile anymore. It is about preserving your tax-free transfer status.

Who Pays This Tax? (It Is Not Who You Think)

The political framing of this tax was aimed at undocumented immigrants sending money abroad. But the actual law does not check immigration status. Section 4475 applies to all senders in the United States:

• U.S. citizens
• Green card holders
• Visa holders (H-1B, L-1, F-1, etc.)
• Undocumented residents
• Anyone physically present in the U.S. making a qualifying transfer

The Removed Tax Credit: Why It Matters

This is the part that caught many Americans off guard. The House version of the bill (May 2025) included a refundable tax credit that would have allowed U.S. citizens to claim back the 1% on their annual tax return. The Senate removed this provision entirely before passing the bill.

As enacted: U.S. citizens who pay the remittance tax cannot claim a credit, deduction, or any other tax benefit to offset it.^[3] Federal excise taxes are not deductible on Schedule A, and the law created no new credit mechanism.

This means if you are an American living abroad and you fund a transfer with cash (maybe because your bank account was closed), you pay the same 1% as any other sender, with no way to get it back.

What This Means for Different Groups

Expats living abroad: If you maintain a U.S. bank account and transfer money electronically, you are fine. The risk is losing your bank account. Banks have been aggressively closing accounts for Americans abroad who cannot pass address verification checks. Residential address services like YourTaxBase provide the Florida street address that keeps your account active.

Digital nomads working remotely: You are likely already using digital transfer tools (Wise, Mercury, Schwab). Keep doing that. The bigger concern is making sure your U.S. banking infrastructure stays intact as you move between countries.

Remote workers sending money to family: If your family receives money from you via bank transfer or Venmo, no change. If anyone in your household sends money via cash-based services, switch to bank-funded transfers.

RVers and full-time travelers: You are almost certainly exempt if you have any U.S. bank account. The domicile question matters more for state tax than remittance tax, but both benefit from having a stable Florida residential address.

How the Tax Is Collected (You Do Not File Anything)

Unlike income tax, you do not report the remittance tax on your 1040 or any personal return. Here is how it works:

1. At the point of transfer: The remittance provider (Western Union, MoneyGram, a bank, a money transfer app) adds 1% to your transaction if it is cash-funded
2. The provider holds the tax: They are required to make semimonthly deposits to the IRS via EFTPS (Electronic Federal Tax Payment System)
3. Quarterly filing: The provider reports total tax collected on IRS Form 720 (Quarterly Federal Excise Tax Return)
4. If they fail to collect from you: The provider owes the tax themselves. This is called "secondary liability" under Section 4475(b)(3)

Key Compliance Dates

Date	What Happens
January 1, 2026	Tax takes effect on qualifying transfers
January 29, 2026	First semimonthly deposit due from providers
April 30, 2026	First quarterly Form 720 due
Through September 30, 2026	IRS penalty relief period (Notice 2025-55)

Expect Confusion at Transfer Counters

The IRS issued Notice 2025-55 specifically because they know providers are not ready.^[4] The notice waives failure-to-deposit penalties for the first three quarters of 2026, as long as providers make good-faith attempts to collect and remit the tax.

Translation: if you walk into a Western Union in February 2026, the agent might not even know about the tax yet. Do not assume silence means exemption. The law is in effect regardless of whether your provider has implemented collection.

The Anti-Circumvention Rules

Congress anticipated that people would try to work around the tax. Section 7701(l) includes anti-conduit provisions that target:

• Routing transfers through domestic intermediaries to disguise the international destination
• Structuring multiple small transfers to avoid detection
• Using third parties or shell arrangements to obscure the cash funding source

The IRS has the authority to "look through" intermediary transactions and apply the tax to the ultimate outbound transfer. This is not a loophole-friendly law.

How to Legally Avoid the Remittance Tax (Completely)

This is not tax avoidance advice. It is what the law explicitly exempts. The simplest way to never pay the 1% tax:

Step 1: Maintain a U.S. Bank Account

This is non-negotiable. Your bank account is your exemption. Every transfer funded from a U.S. bank account at a BSA-regulated institution is automatically exempt under Section 4475(d).

The problem: Banks are closing accounts for Americans who cannot verify a physical U.S. address. A PO box will not work. A mail forwarding service will not work for most banks. You need a bona fide residential street address that passes KYC (Know Your Customer) verification.

Domicile services like YourTaxBase provide exactly this: a real Florida residential address (not a PMB or PO box) that satisfies bank address verification requirements. This keeps your account open, which keeps your transfers exempt.

Step 2: Fund All International Transfers Electronically

Use any of these methods and you will pay $0 in remittance tax:

• ACH transfer from your U.S. bank
• Wire transfer from your U.S. bank
• Wise (funded from U.S. bank account)
• Remitly (funded from U.S. bank account or card)
• PayPal / Xoom (funded from U.S. bank account)
• Venmo (linked to U.S. bank)
• U.S.-issued debit or credit card through any provider

Step 3: Stop Using Cash-Based Transfer Services

If you currently send money by walking into a grocery store, pharmacy, or transfer agent with cash, stop. Open a bank account (or maintain the one you have) and switch to digital transfers. The 1% tax is designed to push senders toward the banking system, and the law rewards you for using it.

Step 4: Keep Your Florida Domicile Current

Your domicile is not just about state income tax anymore. It is the foundation of your U.S. financial identity. A current Florida domicile with a residential address, driver's license, and proper documentation ensures:

• Your bank account stays open
• Your transfers stay exempt from the remittance tax
• Your state tax liability stays at $0
• Your mail gets forwarded wherever you are

Real-World Scenarios: What You Will Actually Pay

Let us run the numbers for different situations:

Scenario 1: Digital Nomad in Portugal

Sarah earns $95,000/year as a freelance designer. She is domiciled in Florida and transfers $2,000/month to her Portuguese bank account via Wise, funded from her Schwab checking account.

Remittance tax owed: $0. Bank-funded digital transfer. Fully exempt.

Scenario 2: Expat in Mexico Supporting Family

Carlos is a U.S. citizen living in Mexico City. He sends $800/month to his mother in Guadalajara. He walks into an OXXO store and pays cash through a Western Union kiosk.

Remittance tax owed: $96/year ($800 x 1% x 12 months). If Carlos switches to a bank-funded transfer through his U.S. bank account, he pays $0.

Scenario 3: Remote Worker Paying Foreign Contractor

James runs a small agency from his RV. He pays a developer in India $3,500/month via ACH through Mercury bank.

Remittance tax owed: $0. Bank-funded ACH transfer. Note: business transfers may have different considerations. Consult a tax professional for business remittance classification.

Scenario 4: Expat Who Lost Their Bank Account

Maria is an American living in Thailand. Her bank (Chase) closed her account because she could not verify a U.S. address during a routine KYC check. She now sends money through a cash-based service.

Remittance tax owed: 1% of every transfer. If Maria establishes a Florida domicile with a residential address through a service like YourTaxBase, she can reopen a U.S. bank account and eliminate the tax entirely.

How This Connects to the Bigger Picture

The remittance tax does not exist in isolation. It is part of a web of financial incentives that all point in the same direction: maintain a clean, documented U.S. financial identity.

What You Need	Why It Matters in 2026
Florida residential address	Keeps bank account open, which means remittance tax exemption
Active U.S. bank account	Exempts all international transfers from the 1% tax
Florida domicile	$0 state income tax (saves $5,000 to $15,000+ per year)
Updated driver's license	Supports domicile claim; required for bank KYC
Proper documentation	Audit protection if IRS or state questions residency
Mail forwarding	Receive IRS notices, bank statements, legal documents

Every piece reinforces the others. Lose your address, then lose your bank account, then lose your remittance exemption, then lose your domicile claim, then lose your state tax savings. It is a chain, and the first link is a real residential address.

What the IRS Has Not Clarified Yet

The law is new and guidance is still evolving. Here are open questions as of February 2026:

• Cryptocurrency transfers: The law references "remittance transfer providers" as defined under the Electronic Fund Transfer Act. It is unclear whether crypto-to-fiat off-ramps that send funds abroad fall under Section 4475. The IRS has not issued guidance.
• Peer-to-peer app transfers: If you Venmo money to a friend abroad (funded from your bank), it is likely exempt, but Venmo's international capabilities are limited and the IRS has not specifically addressed P2P apps.
• Employer payroll to foreign workers: If a U.S. company pays a foreign contractor via a cash-funded method (unusual but possible), the excise tax may apply. Most payroll providers use ACH, making this a non-issue in practice.
• Stablecoin and digital dollar transfers: Not addressed in the current law. This could become relevant as digital payment infrastructure evolves.

We will update this article as the IRS issues additional guidance.

Self-Assessment: Are You Exposed?

Run through this checklist:

• Do you currently send money internationally using cash or money orders? If so, you are paying the 1% tax.
• Has your U.S. bank asked you to verify your address recently? If so, your exemption may be at risk.
• Do you have a residential (not PO box) U.S. address on file with your bank? If not, you face account closure risk.
• Are you domiciled in a state with 0% income tax? If not, you are overpaying on state taxes too.
• Do you have a current, valid U.S. driver's license? If not, most bank KYC checks will flag your account.

If you answered "yes" to question 1 or "no" to questions 3 through 5, you have work to do, and the longer you wait, the more you pay.

The Bottom Line

The 1% remittance tax sounds scarier than it is for most mobile professionals. If you have a U.S. bank account and send money digitally, you are already exempt. The real risk is not the tax itself. It is losing the banking relationship that exempts you from it.

Banks are closing accounts. Address verification is getting stricter. The financial infrastructure that protects you as an expat, digital nomad, or remote worker starts with one thing: a legitimate, documented U.S. residential address tied to a proper state domicile.

How YourTaxBase Can Help

• Florida residential address: A real street address (not a PO box) that satisfies bank KYC requirements and anchors your domicile
• Domicile documentation: Declaration of Domicile filing, voter registration guidance, and the paperwork trail that proves Florida is your legal home
• License tracking: Reminders and support for Florida driver's license renewal so your domicile stays current
• Mail forwarding: IRS notices, bank statements, and legal documents forwarded wherever you are in the world
• Ongoing compliance monitoring: So nothing slips through the cracks

See plans and pricing →

References

1. World Bank: Migration and Remittances Data - Bilateral remittance data showing U.S. outbound remittance volumes
2. KNOMAD/World Bank: Migration and Development Brief 41 - Global remittance flow data for 2024
3. P.L. 119-21: One Big Beautiful Bill Act (congress.gov) - Full text of enacted legislation including Section 70604 (IRC Section 4475)
4. IRS Notice 2025-55 (irs.gov) - Penalty relief guidance for remittance tax providers during implementation period
5. IRS: Excise Tax Overview (irs.gov) - General guidance on federal excise tax filing and Form 720
6. Congressional Budget Office (cbo.gov) - Revenue scoring estimates for the One Big Beautiful Bill Act
7. FinCEN: Bank Secrecy Act (fincen.gov) - BSA regulations defining qualifying financial institutions for the bank account exemption
8. 26 U.S.C. Section 7701(l): Anti-Conduit Rules (law.cornell.edu) - Anti-circumvention provisions applicable to remittance tax avoidance
9. CFPB: Regulation E (Electronic Fund Transfer Act) - Definition of remittance transfer providers referenced in Section 4475
10. RSM US: Tax Alerts - Professional analysis of the One Big Beautiful Bill Act tax provisions

Sources & Methodology: This article synthesizes guidance from P.L. 119-21 (One Big Beautiful Bill Act), IRC Section 4475, IRS Notice 2025-55, World Bank remittance data, Congressional Budget Office scoring, and professional tax analysis from RSM and other advisory firms. All citations reference publicly available government and authoritative sources. Individual circumstances vary, and specific tax situations should be reviewed with qualified tax professionals.