Sending money home is a lifeline. It supports parents, pays for education, and helps friends in need. That is why recent news about a new federal tax on money transfers has sparked questions.
Beginning January 1, 2026, a new 1% federal excise tax will apply to certain international money transfers sent from the U.S. This legislation, part of the “One Big Beautiful Bill Act,” aims to generate revenue by taxing specific financial transactions that are cash based or funded with a cash like instrument such as a cashiers check or money order.
While the details can be somewhat complex, the most important thing to know right now is this: the federal remittance tax does not currently apply to transfers funded by bank accounts, debit/credit cards, or digital wallets such as ApplePay and GooglePay.
Here is what we know so far about how this new law works, who it impacts, and how you can continue to send more money home tax-free by sticking with digital transfers.
What is changing in 2026?
Sending money abroad has typically involved familiar costs like provider fees and exchange rates. But until now, U.S. federal taxes haven’t been part of the equation.
Under the new law (Section 4475 of the Internal Revenue Code), the U.S. government will impose a 1% excise tax on the amount of remittance transfers paid for with cash or cash-like instruments. For example, if this tax is applied to a $500 transfer paid for in cash, an additional $5 tax would be collected by the remittance transfer provider and sent to the IRS.
Based on current information, this tax targets physical, cash-based transfers, and includes specific exemptions. It is expected to impact transfers made through in-person agents and similar services where physical currency changes hands.
Who is affected by the new remittance tax?
According to IRS Notice 2025-55, the 1% remittance tax applies only when the sender provides funds using cash or other similar “physical instrument.”
You will likely be expected to pay the tax if you fund your transfer with:
- Cash: Handing over physical currency at a store or agent location.
- Money Orders: Purchasing a paper money order to fund the transfer.
- Cashier’s Checks: Using a physical check issued by a bank.
- Other Physical Instruments: Any similar paper-based funding method handled by a remittance transfer provider.
If you currently stand in line at a grocery store, pharmacy, or money transfer agent to hand over cash to fund a remittance transfer, those transactions will likely become 1% more expensive starting in 2026.
Why Remitly transfers are exempt from the Remittance tax
We know every dollar you earn matters. You work hard for your money, and we want you to keep as much of it as possible.
Based on our current understanding of the legislation, Remitly transfers are not subject to the new 1% federal remittance tax.
This is because Remitly is a 100% digital service. The law specifically exempts transfers funded by electronic means. When you use the Remitly app or website, you pay for your transfer via:
- Bank account
- Debit card
- Credit card
- Digital wallets (ApplePay, GooglePay)
Because you are not handing us physical cash, a money order, or a cashier’s check, the Section 4475 excise tax does not apply to your transaction.
What this means for Remitly customers
As we look toward 2026, here is what Remitly customers can expect:
- The federal remittance tax does not apply to Remitly transfers: You continue to pay only our standard low fees (if applicable).
- No tax-related price hike: Your cost to send money does not increase because of this specific tax law.
- Same security: You get the same peace of mind knowing your money is safe.
We are committed to transparency. When you send with us, you will always see the exact total cost and the exact amount your recipient will receive before you hit “Send.”
Switching to digital transfers from cash
If you currently use cash agents for sending remittances, you might be worried about switching to an app. Change can be intimidating when it involves your finances. However, switching to digital payments is easier than you might think, and is one way to not be subject to the 2026 remittance tax.
It is secure
Digital transfers are often more secure than carrying large amounts of cash to a store. Remitly uses bank-level security and encryption to protect your data and your money. Plus, because everything is digital, you will have an electronic record of every transaction.
It saves time
Forget about checking store hours, waiting in line, or filling out paper forms. With an app, you can send money from your living room, on your lunch break, or even in the middle of the night.
It is easy to start
You don’t need to be a tech expert. If you have a bank account, debit card, or prepaid card, you can send money in minutes.
- Download the app: Available on iOS and Android. Don’t want the app? No problem. You can send money with Remitly via WhatsApp.
- Create an account: It’s free to sign up.
- Enter your details: Add your recipient’s information and your payment method.
- Send: Review the details and confirm.
We also offer 24*7 support in 18 languages, so help is always available if you have questions along the way.
Stay informed — we’ll keep you updated
The financial landscape is always evolving, and laws can change. At Remitly, our compliance and legal teams monitor regulations around the clock.
As we approach January 1, 2026, we will keep you informed of any further developments regarding the federal remittance tax. Our promise is to provide a reliable, transparent service that puts more money in the hands of your loved ones.
For now, you can rest easy knowing that your digital transfers with Remitly remain tax-free.
Frequently Asked Questions (FAQs)
What is the 2026 U.S. remittance tax?
It is a 1% federal excise tax on international money transfers funded by physical instruments like cash, money orders, or cashier’s checks. It goes into effect on January 1, 2026.
Does the new tax apply to Remitly transfers?
No. Because Remitly transfers are funded digitally (via bank account, debit card, or credit card) and not via physical cash, they are exempt from this specific tax.
How can I avoid paying remittance tax?
The most effective way to not be subject to the tax is to use a digital money transfer provider like Remitly. Avoid using services where you must physically hand over cash, money orders, or cashier’s checks to an agent.
What payment methods are affected?
The tax applies to transfers funded by “physical instruments.” This includes cash, money orders, and cashier’s checks. It typically does not apply to transfers funded by debit cards, credit cards, or direct bank withdrawals.
Is Remitly still a safe and affordable option?
Yes. Remitly remains a secure, affordable, and fast way to send money internationally. Since we are not subject to the new 1% tax, we remain a cost-effective alternative to traditional cash-based wire services.