A new federal tax on some international money transfers started on Jan. 1. The 1% levy applies to remittances sent using cash, checks, or money orders, according to reports from Payments Dive. Transfers made with credit cards, debit cards, prepaid cards, or digital money services are exempt.
President Donald Trump signed the tax into law on July 4 as part of a larger policy bill. The tax is smaller than earlier proposals, which had suggested rates as high as 5%. It is expected to raise nearly $10 billion annually for the U.S. Treasury once fully implemented, Politico reported.
For a person sending $5,000 overseas with a money order, the tax adds $50. While digital transfer services and card-based payments are not taxed, they often have their own fees or exchange rate costs.
Immigrants in the U.S. sent $79 billion to their home countries in 2022, according to the International Organization for Migration. The U.S. has been the top remittance-sending country for decades. This money supports family members abroad for housing, food, education, and medical care.
Critics say the tax places a burden on working families already dealing with high living costs. The Overseas Development Institute, a policy think tank, warned that taxing remittances could be "counterproductive," potentially reducing household stability and weakening a tool for poverty reduction.
Supporters have framed the tax as targeting undocumented immigration. A statement from the House Ways and Means Committee said, "Illegal immigrants will now pay taxes on remittances sent to foreign countries." However, the tax applies broadly, regardless of immigration status.
Legal immigrants already pay income tax, meaning they may face additional charges with this new tax. The measure marks a rare new tax in a Republican-backed bill that otherwise focused on tax relief.