New Tax on Remittances Sparks Concerns for US Senders

Joanne Nichols, a 66-year-old resident of Queens, New York, regularly visits a Brooklyn money transfer business to send cash remittances to her family in St. Lucia. She sends money to her daughter, though less frequently than in the past, to provide assistance.

However, a new law, the One Big Beautiful Act, will introduce a 1 percent excise tax on cash remittance transfers to foreign countries starting January 1, 2026. This fee will be added to existing costs, which Nichols already considers high. She anticipates sending less money abroad if the fees increase.

The United States has consistently been the leading remittance-sending country globally. In 2022, approximately $79 billion in remittances were sent from the US. Major recipient countries include India, Mexico, and the Philippines. African nations received nearly $10 billion in remittances from the US in 2024, while Latin America and the Caribbean received $161 billion in 2023, largely from the US.

Helen Dempster from the Center for Global Development highlights the critical role of these money transfers in providing household income and economic stability for low- and middle-income countries. Neal Allen, a 52-year-old from Brooklyn originally from Jamaica, also sends money home monthly to support his family. He emphasizes the importance of the funds for essential needs and expresses a desire for lower fees to enable him to send more.

New York City, with over 3 million foreign-born residents, has numerous independent businesses offering remittance services. The initial proposal for the excise fee was 3.5 percent, but it was reduced to 1 percent before the law was enacted. The tax applies to cash, money orders, and similar physical instruments. Transfers from bank accounts, online platforms, or using debit/credit cards are exempt.

The sender is responsible for paying the tax, and the remittance provider must collect it for the IRS. The average transfer fee is estimated at 6.4 percent. A nonprofit organization found that lower-income immigrant workers lost billions in hidden exchange rate markups when sending money home.