The U.S. government will impose a new 1% federal remittance tax starting on January 1, 2026, which is poised to impact immigrant families who rely heavily on sending money home. This tax will add a financial burden to the millions of individuals who support their loved ones abroad, particularly during the holiday season when remittances typically increase.
The United States is currently the world’s largest sender of remittances, with an estimated $93 billion sent overseas through formal channels in 2024. Immigrant workers contribute significantly to this total, often sending money that is essential for their families’ survival. In New York City alone, residents send approximately $10 billion to relatives overseas, incurring more than $500 million in transfer fees. The new tax is expected to draw an additional $100 million from these households, compounding the costs already associated with remittance transfers.
For individuals like Steve, a construction worker from Guatemala living in New York City, these remittances are crucial. “It is very important to send money to my family back home, to my daughter and son who are in school [there]. They really need that money,” he shared. Steve’s routine is simple: pay rent and bills, and then send what remains to his children. With the new tax in effect, sending $1,000 abroad will come with an added $10 tax, which, while seemingly small, can make a significant difference in places with limited purchasing power.
The tax was introduced under former President Donald Trump’s “Big, Beautiful Bill” earlier this year and will require senders to shoulder the tax burden. Although individuals using services like Wiseapp or Remitly are exempt from this tax, many immigrants prefer traditional methods such as cash or money orders, which often come with their own set of fees.
Another immigrant, Samia Fawad, a home-health aide in Queens, regularly sends money to her elderly parents in Pakistan. She has transitioned to digital transfers to avoid the remittance tax but notes that the fees on digital platforms can still be considerable. “The platform I currently am using to send money back home charges a fee when I send less than $200,” she explained, highlighting the financial strain that these costs impose.
According to a 2025 global remittance survey by Visa, a significant portion of individuals still prefer sending money from physical locations rather than digitally. While 67% of respondents favor digital banking, 40% continue to rely on traditional outlets such as Western Union or MoneyGram. Ariel Tang, a tax accounting professor at the New Jersey Institute of Technology, emphasized the cumulative impact of fees, stating, “Adding a 1% increase can certainly be burdensome for immigrants when they transfer money.”
The remittance tax was initially proposed as a 5% tax targeting non-citizens specifically, but this provision was later revised to apply universally to anyone sending money abroad. The Center for Global Development, a nonpartisan think tank, has indicated that the new tax could discourage migrants from using formal remittance channels, potentially leading to an uptick in informal transfers.
“During the holiday season, when individuals are sending money back to family abroad, we may see more of an uptick in the amount being sent in before the bill takes effect in just a month,” Tang remarked, suggesting that many families may rush to send money before the new tax burdens them.
As the start date approaches, Steve remains concerned about the additional costs. “The tax won’t stop me from sending money to my kids, but it will mean that I will have more fees to keep up with,” he said. The looming remittance tax serves as a reminder of the financial challenges faced by immigrant families who rely on these vital funds to support their loved ones back home.
