Which funding methods are exempt from the remittance tax?

ACH bank transfers, debit cards, credit cards, bank wires, and other digital funding methods are exempt. The tax targets only physical-instrument funding: cash, money order, and cashier's check.

Who pays the tax — the sender or the recipient?

The tax is collected by the remittance transfer provider from the sender at the time of the transfer. Most providers add the 1% as a separate line on the receipt or roll it into the displayed total.

Is the 1% the only U.S. cost on a remittance?

No. The 1% tax stacks on top of the provider's transfer fee and any FX markup. A storefront cash send through a traditional remittance provider can still see a 5–7% all-in cost; the 1% is the new federal layer added to the existing private fees.

Back to home EFFECTIVE JANUARY 1, 2026

The 1% U.S. remittance tax — what it is, and what's exempt.

Q: What is the 1% U.S. remittance tax?

The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, imposes a 1% federal excise tax on remittance transfers funded with cash, money orders, or cashier's checks. The tax is effective for transfers initiated on or after January 1, 2026.

On July 4, 2025, the U.S. Congress passed the One Big Beautiful Bill Act (OBBBA). Buried in its 1,000+ pages is a new federal excise tax of 1% on certain remittance transfers, effective for transfers initiated on or after January 1, 2026. This page is a plain-English explainer of what the tax does, who it hits, and what's exempt — written by Pesito, a pre-launch service being designed so its transfers would fall outside the excise, because funding is planned as debit card and bank transfer (ACH) only. This is general information, not tax advice — consult a tax professional.

What the law actually taxes.

The OBBBA's remittance excise targets the funding method, not the destination, the dollar amount, or the provider. The three categories explicitly taxed are:

Cash — handed over the counter at a Western Union, MoneyGram, Ria, or Walmart-to-Walmart agent location.
Money orders — purchased at the post office, Walmart, or a check-cashing storefront.
Cashier's checks — drafted at a bank teller window.

Anything that touches a banking rail or a card network is outside the scope. The bill's authors explicitly chose physical-instrument funding because it's the slice of the remittance market most associated with under-banked senders and cash-economy flows. Whether that policy goal is wise is a political question; the operational fact is that ACH, debit, credit, and wire transfers are not taxed.

Side-by-side: who pays the 1%?

Funding method	Subject to 1% tax?	Where it shows up
Cash at a storefront	Yes	Western Union, MoneyGram, Ria, Walmart2Walmart agent counters
Money order	Yes	USPS, Walmart, check-cashing stores
Cashier's check	Yes	Bank-issued draft funded with cash
Debit card	No	Wise, Remitly online, Xoom — and Pesito (planned funding method)
ACH (bank account)	No	Wise, Remitly Economy — and Pesito (planned funding method)
Credit card	No	Most online remittance apps
Bank wire	No	Bank-to-bank international wire

Why the tax exists.

The Joint Committee on Taxation scored the OBBBA remittance provision as raising roughly $10 billion over the 10-year budget window, with a disproportionate impact on the U.S.→Mexico corridor (the largest single corridor by volume, around $64.7B in 2024 per the Dallas Fed). Mexico's finance ministry has projected a country-level revenue hit of approximately $1.5 billion per year if the corridor's physical-funding share holds. Holland & Knight, Latham & Watkins, and several other firms have published client memos analyzing the implementation rules and the carve-outs we summarize below.

Where Pesito sits.

Pesito is pre-launch — no Pesito transfers exist yet. Pesito is being designed so transfers would fall outside the excise (a 1% tax on cash-funded sends), because Pesito's planned funding methods are debit card and bank transfer (ACH) only — no cash funding. Planned launch pricing is a flat $1 Pesito fee per US→Mexico transfer; your exact fee and rate are always shown in the app before you confirm and may change before launch. Transfers will be subject to identity verification, corridor availability, limits, and compliance review.

Remitly took a similar posture in their hero copy in early 2026 ("No U.S. remittance tax on Remitly transfers"). This is general information, not tax advice — consult a tax professional about your specific situation. See the send-money-to-Mexico guide →

Edge cases worth knowing.

A few situations the rule book leaves ambiguous as of the most recent Treasury / IRS guidance (subject to revision — this page tracks updates):

Reloadable prepaid cards funded with cash — Treasury guidance treats the cash-load as the taxable event; the subsequent transfer from the card is generally exempt. In practice, providers may price the cash-load fee to reflect the full impact.
P2P apps like Cash App, Venmo, Zelle — domestic only; the tax does not apply because they do not initiate cross-border remittance transfers.
Crypto-funded sends — outside the scope of the OBBBA remittance provision as written; subject to its own evolving regulatory framework.

Frequently asked.

What is the 1% U.S. remittance tax?

A federal excise tax of 1% on remittance transfers funded by cash, money order, or cashier's check, signed into law July 4, 2025 as part of the OBBBA. Effective for transfers initiated on or after January 1, 2026.

Which funding methods are exempt?

ACH, debit card, credit card, bank wire, and other digital methods. The tax targets physical-instrument funding only.

Does the tax apply to Pesito?

Pesito is pre-launch, so no Pesito transfers exist yet. Pesito is being designed so transfers would fall outside the excise, because Pesito's planned funding methods are debit card and bank transfer (ACH) only — no cash funding. This is general information, not tax advice — consult a tax professional.

Who collects the tax — me or my recipient?

The provider collects from the sender at the time of the transfer.

Is 1% the total cost?

No. The 1% stacks on top of the provider's transfer fee and FX markup. A cash send via a traditional storefront can still cost 5–7% all-in.

What if I refund or cancel a taxed transfer?

Treasury guidance on refund mechanics is still evolving. In general, an unexecuted or refunded transfer should not generate a final excise liability, but providers are required to remit on a quarterly schedule. Confirm with your provider.

Designed to stay outside the excise.

Pesito is pre-launch and is being designed with digital-only funding (debit and ACH) so transfers would fall outside the 1% federal remittance excise on cash-funded sends. Not tax advice. Join the waitlist for early access.

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Sources: H.R. resolution accompanying OBBBA (signed Jul 4, 2025); IRS / Treasury preliminary remittance-tax guidance (Q4 2025); Holland & Knight client alert; Joint Committee on Taxation revenue estimate. This page is general information, not legal or tax advice. Consult a licensed professional for advice on your specific situation.