New U.S. Law Imposes 1% Tax on Cash-Based International Money Transfers Starting 2026

Starting January 1, 2026, a new United States (U.S.) federal law will impose a 1% excise tax on certain international money transfers, affecting senders who use cash, money orders, or cashier’s checks (cheques). The measure is part of the “One Big, Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025.

Under the law, the tax applies specifically to transfers funded with physical instruments, including cash, money orders, cashier’s checks, or similar methods. Transfers made through U.S. bank accounts, U.S.-issued debit or credit cards, or digital wallets are exempt. The tax is levied on the sender, and remittance transfer providers such as Western Union are required to collect the 1% tax at the time of the transaction and remit it quarterly to the IRS. Providers who fail to collect the tax are secondarily liable.

The IRS has announced limited penalty relief for providers during the first three quarters of 2026.

The tax is expected to disproportionately affect unbanked individuals and those who rely on cash-based, in-person services. The Joint Tax Committee projects that the measure will generate nearly $10 billion in revenue over the next decade. Earlier proposals for the bill suggested higher rates of 3.5% or 5%, but the final signed version reduced the rate to 1%. Additional legislation, including the proposed “REMIT Act,” has suggested increasing the tax rate up to 15%.

Consumer protections remain in place under the Consumer Financial Protection Bureau’s (CFPB) Remittance Transfer Rule. Providers must disclose fees, exchange rates, and the amount to be delivered. Consumers retain cancellation rights within 30 minutes of payment and can report errors up to 180 days after the transfer.

This law represents a significant shift in U.S. policy on international remittances, with potential impacts for millions of senders who rely on cash-based transfers to support family and business abroad.