The holiday season is here, a time when countless immigrants in the United States are sending a little extra money back home to their families. But now, many are bracing for a new financial hurdle: effective January 1, 2026, a federal 1% remittance tax will go into effect, adding a new cost to the cash, checks, and money orders that millions of immigrants rely on to support loved ones abroad.
The U.S. is the world’s largest sender of remittances, with an estimated $93 billion sent abroad through formal remittances in 2024. A significant portion of that comes from immigrant workers, people for whom remittances are not discretionary, but essential to their families.
In New York City alone, residents send approximately $10 billion to relatives overseas and were charged more than $500 million in transfer fees to do so. The addition of the federal 1% remittance tax would pull an additional $100 million from immigrant households on top of the existing fees.
For individuals like Steve, a Guatemalan construction worker in New York City who regularly sends money back home, remittances are a lifeline for his family. “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. As soon as I get paid, I first pay my rent, take care of my bills and the rest goes to my kids in Guatemala.”
The new tax, introduced as part of President Donald Trump’s Big, Beautiful Bill earlier this year in July, threatens to make an already costly lifeline even more burdensome for low-income workers for whom every dollar, and every gesture of support, carries extra weight. Under the new policy, the sender will be responsible for paying the tax.
Steve, who requested that Documented only use his first name to protect his privacy, emphasizes that, for him, every dollar counts. Once the new tax takes effect, if a person were to send $1,000 to a relative abroad, they’d have to pay an additional $10 in remittance tax. And while $10 may not seem like a lot, that’s $10 being taken away from Steve’s family in Guatemala, where the purchasing power of that $10 would be significant.
Individuals who send money through digital transfers using services such as Wiseapp, or Remitly, will not be subject to this 1% federal tax, but for many who are not adept with navigating digital platforms, sending money orders or cash remains the preferred method.
Steve has always sent money home via cash at a physical location like MoneyGram, as he feels he isn’t tech savvy enough to use digital transfers.
According to a 2025 global remittance survey by Visa, 67% of individuals prefer sending money to a bank account digitally via an app, and 40% prefer to send money from physical locations, such as banks or money transfer storefronts.
Samia Fawad, a home-health aide in Queens, who has a elderly parents back home in Pakistan says she sends money to them regularly, about once a month, which helps fund their “basic necessities.” Samia says she used to send money to her family through money orders, but now she is preparing to send money via digital transfers to avoid the new tax. However, she points out, the fee on digital platforms is also costly.
“The platform I currently am using to send money back home charges a fee when I send less than $200,” she said adding, “another platform charges a $9 fee on wire transfers. That’s $9 taken away from my family — which is about 2,500 PKR — enough for basic household grocery items in Pakistan that can last for a week.” Samia typically sends back less than $200, which means she regularly incurs that $9 fee on her transactions.
Ariel Tang, a tax accounting professor at the New Jersey Institute of Technology, explains that Samia’s experience is not unique.
“Places like Western Union and MoneyGram — they already charge a certain percentage fee and depending on the exchange rate it can add more costs,” she said. “The total cost is about 3-5% on the amount being sent simply paid in transfer fees, so adding a 1% increase can certainly be burdensome for immigrants when they transfer money.”
An earlier version of the bill included a 5% remittance tax specifically targeting non-citizens, such as green card and visa holders. That provision was later revised and replaced with a flat 1% tax on anyone who sends money abroad, regardless of immigration status.
The Center for Global Development, a nonpartisan think tank focused on reducing global poverty through economic research, finds that the 1% remittance tax is likely to discourage people from sending money through formal channels or even altogether.
“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,” says Tang.
With the tax increase set to begin in January, Steve worries the costs going forward will stack up quickly. “Back home, they’re waiting for my help,” he says, “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.”
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