The new federal tax on money sent abroad: what families need to know

This page explains the federal tax on money sent abroad. It is general information, not tax or legal advice. For help with a bank account or a money app, follow the links above.

Is there a new tax on money I send to family abroad?

Yes. A federal law signed on July 4, 2025 added a 1% tax on certain money transfers sent from the United States to people in other countries. It applies to transfers made after December 31, 2025. So any transfer you made on or after January 1, 2026 may be covered.

The key word is certain. The tax is only for transfers you pay for with:

• Cash (US dollars or foreign bills and coins)
• A money order
• A cashier's check
• A traveler's check (under the proposed IRS rules)

If you pay another way, such as from a bank account or with a card, this tax does not apply.

We know every dollar matters when you are supporting family far away. The good news is that most families can avoid this tax with one change in how they pay.

Who pays it, and how?

You, the sender, owe the tax. But you do not send it to the IRS yourself. The company that sends your money, such as a money transfer store, must collect it from you when you pay. The company then reports and pays it to the IRS.

If the company forgets to collect it from you, the company has to pay it.

Federal rules already require money transfer companies to show you the taxes and fees they collect before you pay, and again on your receipt. So the 1% should appear on your paperwork. Read it every time.

What is taxed, and what is not?

A warning about prepaid cards. The proposed rules say the IRS can treat a transaction as cash if its main purpose is to avoid the tax. The IRS gave the example of a store selling a customer a prepaid card for cash just so the transfer is not taxed. Do not let a store set up a workaround like that for you.

Checks you cash at the store. Many people cash a paycheck at a money transfer store and send part of it home on the spot. Under the proposed rules, that counts as paying in cash, even if you never hold the bills.

How much is the tax?

It is 1% of the money that will reach your family. Fees you pay the company are not taxed.

• Send $100: the tax is $1.
• Send $300: the tax is $3.
• Send $500: the tax is $5.

If the company adds a promotional bonus to what your family gets, the proposed rules count that bonus as part of the amount taxed.

Put it in perspective. The fees companies charge are often much bigger than the tax. In its April 2026 notice, the Treasury Department cited World Bank estimates that the average fee to send money from the United States in 2025 was 5.56% for a $200 transfer and 3.81% for a $500 transfer. Shopping for a lower fee can save you more than avoiding the tax.

How can I send money without paying this tax?

Pay the transfer company in a way that does not use cash or paper money orders.

1. Use a bank or credit union account. Pay from your account, or use the bank's own international transfer service. No Social Security number? Many banks and credit unions in California open accounts with an ITIN or a consular ID. See Open a bank account with an ITIN or consular ID.
2. Use a debit card. Paying the transfer store with a debit card linked to your account avoids the tax.
3. Use an app or website you trust that takes money from your bank account or card. Before you sign up, read How to tell if a money app is safe to trust.
4. Credit cards avoid the tax too, but call your card company first and ask whether a money transfer will cost you extra fees or interest.

If cash is the only way you can send, you can still send. The tax is 1%. Compare total costs between companies, including the exchange rate, so your family gets the most.

Are these rules final?

Not yet. A Federal Register search on October 21, 2026 found only the proposed rules, with no final rules. The law itself is final and has applied since January 1, 2026. The IRS published proposed rules on April 13, 2026 that explain the details, like the traveler's check rule and the check cashing rule. Public comments closed June 12, 2026.

The proposed rules say transfer companies and senders may rely on them for transfers made after December 31, 2025, as long as they follow them completely and consistently. Final rules could change some details. Before you rely on a detail, run the Federal Register search again to see if final rules have been published.

What if my transfer is canceled?

The tax attaches when you pay, even if your family picks up the money later. If a transfer is canceled or expires and the company gives your money back, the proposed rules say you may ask the IRS for a refund of the tax. The company cannot get that refund for you. Keep your receipt. The proposed rules do not name an IRS form for this claim, so ask a free tax helper how to file it. See Where to get free tax help if you file with an ITIN.

What if something goes wrong?

Federal law gives you rights when you send money abroad through a money transfer company, bank or credit union:

• Clear information before and after you pay. The company must tell you its fees and taxes, the exchange rate, the amount your family should receive, and when the money will be ready.
• Your language. If the company advertised or helped you in your language, receipts and disclosures generally must be in that language too.
• Cancel in 30 minutes. You can cancel for free within 30 minutes of paying, unless the money was already picked up or deposited.
• Report mistakes within 180 days. Count from the date the company said the money would be ready. Tell the company as soon as you can. Companies generally have 90 days to look into it and must tell you what they found. If the money never arrived, you may get a refund or have it sent again.

Keep every receipt until your family confirms the money arrived.

Questions people ask

Do I have to put this tax on my own tax return? The law makes the transfer company collect it from you when you pay. We did not find any step where the sender files a separate form for a normal transfer. If you have a special case, ask a free tax helper.

Is it 1% on the fee too? No. Under the proposed rules, it is 1% of the amount your family receives. Fees and state taxes are not included.

I send money every week in cash. How much will this cost me? At $200 a week, the tax is $2 a week, or about $104 a year. Switching to a debit card or bank transfer would avoid it.

Does this apply to money I send to someone in another state? No. It applies to transfers to people in other countries. Under the proposed rules, US territories count as states, so transfers there are not covered.

My store says there is no tax because it is small. Is that true? Be careful. Consumer protection rules have a small company exception, but the proposed tax rules do not use it. A small company that sends money abroad may still have to collect the tax.

Can I send money to someone in immigration detention this way? That is a different process with its own rules. See How to visit, call or send money to someone in ICE detention.

Is there a checklist I can print?

Your care for your family crosses borders. With a few small changes, more of it can reach home.