Navigating the New 1% International Remittance Fee: What U.S. Expats Need to Know
Starting January 1, 2026, a major change affects anyone sending money from the United States to a foreign country. Under the One Big Beautiful Bill Act (OBBBA), a new 1% federal excise tax now applies to certain international money transfers.
While a “tax on sending money” sounds alarming, you can easily avoid this fee. The impact depends entirely on how you fund your transfer. Most digital-first expats will not pay this fee at all.
Who is Affected by the 1% Remittance Fee?
The law specifically targets “physical” transactions. You will likely pay this 1% fee if you are a U.S. citizen or green card holder who funds a transfer using:
- Physical Cash at a retail location (like a pharmacy).
- Money Orders.
- Cashier’s Checks.
The remittance transfer provider collects the fee at the time of the transaction. For example, if you send $1,000 using cash, you will owe an extra $10 in federal tax plus the standard service fees.
How to Avoid the Fee (The “Digital Exemption”)
The IRS confirmed that the 1% excise tax does not apply to electronic methods. To skip the 1% fee, simply fund your international transfers using these methods:
- Direct Bank Withdrawals (ACH): Link your U.S. bank account directly to your service.
- U.S.-Issued Debit Cards: Pay using your standard bank debit card.
- U.S.-Issued Credit Cards: Your issuer may charge “cash advance” fees, but you avoid the 1% federal tax.
- Digital Wallets: Apple Pay or Google Pay are generally exempt when tied to digital funding sources.
Essentially, if you avoid using physical paper like cash or checks, you won’t pay the tax.tax.
FAQ: Trending Expat Tax Questions for 2026
Currently, there is no provision in the OBBBA that makes this excise tax creditable or refundable against your federal income tax. It is a separate fee paid at the time of the transfer.
No. The 1% tax is an excise tax, while the $10,000 reporting requirement (often confused with FBAR or anti-money laundering rules) remains a separate regulatory measure. Large transfers will still be reported by banks even if they are digitally funded and exempt from the 1% fee.
No. The tax only applies to outbound transfers originating from a sender in the United States to a recipient in a foreign country. Inward remittances are not affected.
For the 2025 tax year (filed in 2026), the standard deduction has increased to $15,750 for single filers and $31,500 for married couples filing jointly. If your worldwide gross income exceeds these amounts, you generally must file a return.
For the 2025 tax year (filed in 2026), the maximum FEIE amount is $130,000 per qualifying individual.
