Sending money home is a lifeline. It supports parents, pays for education, and helps friends in need. That is why the newly enacted federal tax on money transfers has sparked questions.
As of January 1, 2026, a new 1% federal excise tax now applies 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 cashier’s check or money order.
While the details can be somewhat complex, the most important thing to know is this: the federal remittance tax does not apply to transfers funded by bank accounts, debit/credit cards, or digital wallets such as ApplePay and GooglePay.
Here is what we know about how this law works, who it impacts, and how you can continue to send more money home tax-free by sticking with digital transfers.
What Has Changed in 2026?
Under Section 4475 of the Internal Revenue Code, a 1% federal excise tax is now applied to international remittance transfers that are funded with physical cash or “cash-like instruments” such as money orders or cashier’s checks.
For example, if you send $500 using cash at a physical location, the provider will collect an additional $5 in tax, which goes directly to the IRS.
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.
Skip the Line. Save the Tax: Why Remitly Is the Worry-Free Way to Send Money
All of Remitly’s messaging centers around one core idea: peace of mind. This means:
Proven Worldwide
Millions of customers trust Remitly to send money home. With a global footprint reaching over 170 countries and support for 100+ currencies, Remitly helps families stay connected across borders. Transfers are supported across 5,300+ corridors, making it easier to send where it matters most.
Guaranteed Delivery
Transfers are delivered on time or Remitly refunds your fees. That’s real peace of mind with every send — backed by a global company founded in 2011 and supported by more than 2,800 employees worldwide.
Real-Time Updates
Know exactly where your money is. Both you and your recipient can get updates every step of the way, from the moment you send to final delivery.
Safe and Secure
Multiple layers of security help protect your personal data and funds. Remitly’s global network includes over 5.0 billion bank accounts and mobile wallets, along with approximately 490,000 cash pickup options worldwide, giving recipients flexible and secure ways to receive funds.
24/7 Customer Support
Real help, from real people. Support is available 24/7 in multiple languages, helping customers around the world get assistance when they need it most.
Flexible Delivery Options
Choose what works best: bank deposit, mobile wallet, or cash pickup. With hundreds of thousands of payout locations and integrations across billions of accounts and wallets globally, recipients have flexibility and convenience.
Speed You Can Rely On
Fast transfers mean less time worrying. Whether it’s urgent or routine, Remitly delivers across thousands of global transfer routes.
More Money Makes It Home
No hidden fees. Competitive exchange rates. And when you send digitally through Remitly, you avoid the new 1% federal tax on cash-funded transfers — helping more of your hard-earned money reach the people who matter most.
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.
How to Send Money with Remitly
- Download the app: Available on iOS and Android. Don’t want the app? No problem. You can send money with Remitly via WhatsApp.
- Save Remitly’s WhatsApp number: +1 (217) 802-0009
- Open WhatsApp and start a new chat
- Follow the prompts to get help or begin your transfer
- Complete your transaction on Remitly’s website
Stay Informed
Remitly’s legal and compliance teams continue to monitor developments on all financial regulations. You can count on us to keep you updated as new information becomes available.
For now, the good news is simple: Remitly transfers 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 went 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.