Tax Byte

The One, Big, Beautiful Bill Act’s New Excise Tax on Remittance Transfers

Sharon Kreider, CPA

While most of us were focused on TCJA extensions in the One, Big, Beautiful Bill Act (OBBBA), Congress quietly slipped in a new 1% excise tax on remittance transfers that could catch clients off guard starting January 1, 2026. What began as a 5% tax in early House versions was reduced to 3.5% in the House-passed bill, then finally landed at 1% in the Senate version that became law. Each iteration narrowed the scope significantly, creating some surprising exemptions.

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What's Taxed vs. What's Not

Subject to 1% tax:

Cash transfers through money service businesses
Money orders sent internationally
Cashier’s checks for cross-border payments
Similar physical instruments

Exempt from tax:

Wire transfers from U.S. bank accounts
Credit and debit card transactions
Electronic transfers from financial institution accounts
Cryptocurrency transfers (Bitcoin, stablecoins, etc.)
Prepaid cards issued in the U.S. (but reloads to foreign prepaid cards are taxable)

Electronic and digital methods are generally exempt, while cash-based methods face the tax.

Compliance Mechanics

The tax is imposed on the sender and collected by remittance transfer providers like Western Union and MoneyGram. Unlike earlier versions, there’s no refund mechanism for U.S. citizens. If your transfer method is taxable, you pay 1%. If it’s exempt, you don’t.

Financial institutions face secondary liability if they fail to collect and remit properly, which means they are likely to pass compliance costs through to consumers via higher fees.

Which Businesses Should Worry?

Most businesses don’t send cash internationally. The clients most likely affected are money service businesses themselves, import/export companies working in markets with limited banking infrastructure, and businesses serving immigrant communities who might use money orders for sending money to family.

Example: A small import business that occasionally needs to send cashier’s checks to suppliers in regions where wire transfers aren’t reliable would face the 1% tax. But the vast majority of business clients using standard electronic payment methods won’t be affected.

The original House version would have required extensive identity verification, including taxpayer identification numbers and copies of birth certificates and passports to confirm the identity and status of the sender. These requirements were dropped in the final version.

Tax Practitioner Planning

In 2023, over $23 billion was sent from the United States to India alone. The India example shows just how large the remittance market is – $23 billion to just one country in a single year provides context for why Congress saw this as a significant revenue opportunity, even at the reduced 1% rate.

While the new excise tax on remittance transfers wasn’t a headline provision in the OBBBA, it’s real money for clients who regularly send funds abroad. Understanding which transfer methods trigger the tax—and which don’t—will be essential for proper planning in 2025 and beyond.