Does the 1% Remittance Tax Affect Cash and Electronic Transfers for H-1B Holders?

Key Takeaways

• The 1% remittance tax affects H-1B visa holders sending money via cash, money orders, or informal agents after Dec 31, 2025.
• Bank wire transfers, credit/debit card payments, and licensed financial firms’ transfers are exempt from the 1% tax.
• The tax encourages using formal financial channels and is collected quarterly by transfer companies from non-U.S. citizens.

The One Big Beautiful Bill Act (OBBB) and the 1% Remittance Tax: What H-1B Visa Holders Need to Know

The One Big Beautiful Bill Act (OBBB), which became law in July 2025, introduces a new 1% remittance tax that affects many non-U.S. citizens, including H-1B visa holders. This tax is set to take effect for transfers made after December 31, 2025. Understanding how this tax works, who it applies to, and how it might affect your financial decisions is important for anyone living and working in the United States 🇺🇸 on a temporary visa. This guide explains the details, eligibility, processes, and practical implications of the 1% remittance tax under the OBBB, with a special focus on H-1B visa holders.

What Is the 1% Remittance Tax?

The 1% remittance tax is a new excise tax on certain money transfers sent from the United States 🇺🇸 to other countries. the tax is part of the One Big Beautiful Bill Act, a law passed by Congress in 2025. The main goal of this tax is to collect revenue from non-citizens who send money abroad, especially through cash or informal channels. The tax is collected by the company or bank that handles the money transfer and is then paid to the U.S. government.

Who Does the Tax Apply To?

The tax applies to:

• Non-U.S. citizens, including H-1B visa holders, green card holders who are not yet citizens, and foreign students on visas like F-1 or H-2A.
• Anyone sending money abroad using certain types of transfers, as explained below.

The tax does not apply to U.S. citizens.

Why Was the Tax Introduced?

Lawmakers designed the tax to:

• Raise money from remittances sent by non-citizens.
• Encourage people to use formal, regulated financial channels (like banks and credit unions) instead of cash or informal methods.
• Make it easier for the government to track large sums of money leaving the United States 🇺🇸.

How Does the 1% Remittance Tax Work?

The tax is simple in theory: if you send money abroad using certain methods, 1% of the amount you send will be collected as a tax. For example, if you send $1,000 using a method that is taxed, you will pay an extra $10 in tax.

However, the tax does not apply to all types of transfers. The law makes a clear difference between cash-based and electronic transfers.

Which Transfers Are Taxed?

The 1% remittance tax applies to:

• Cash transfers: If you walk into a money transfer office and pay cash to send money abroad, the tax applies.
• Money orders and cashier’s checks: If you use a money order or cashier’s check to send money, the tax applies.
• Transfers through informal or third-party agents: If you use an unlicensed agent or informal method (sometimes called “hawala” or similar systems), the tax applies.

Which Transfers Are Exempt?

The tax does not apply to:

• Bank wire transfers from U.S.-based banks: If you send money directly from your U.S. bank account to a foreign account, you do not pay the tax.
• Debit or credit card payments: If you use a debit or credit card issued by a U.S. bank to send money, the tax does not apply.
• Transfers via credit unions or licensed financial institutions: If you use a credit union or a licensed money transfer company that operates under U.S. financial regulations, you are exempt from the tax.

This means that most electronic transfers, especially those done through banks, credit unions, or well-known online remittance platforms (like Wise, Remitly, or ICICI Money2India), are not taxed under the OBBB.

Why Are Some Transfers Exempt?

Lawmakers wanted to encourage people to use formal, regulated financial channels. These channels are easier for the government to monitor, and they are generally safer for consumers. By exempting bank and card-based transfers, the law tries to push people away from cash and informal methods.

When Does the Tax Start?

The tax applies to transfers made after December 31, 2025. This gives people time to adjust their habits and learn about the new rules.

How Is the Tax Collected?

The company or bank that handles your transfer is responsible for collecting the tax. For example:

• If you use a money transfer service like Western Union or MoneyGram and pay with cash, they will add the 1% tax to your total and send it to the government.
• If you use a bank wire transfer from your U.S. bank account, the bank will not collect the tax because the transfer is exempt.

The companies must send the collected tax to the government every three months.

How Does This Affect H-1B Visa Holders?

H-1B visa holders are often foreign professionals working in the United States 🇺🇸. Many send money home to support family or pay for expenses in their home country. The new tax will affect how much it costs to send money, depending on the method used.

If you use cash or informal channels:
You will pay an extra 1% tax on every transfer. For example, sending $2,000 in cash will cost you an extra $20.

If you use a U.S. bank, credit union, or card:
You will not pay the tax. Most H-1B visa holders already use formal banking channels, so many will not see any change in cost.

If you use a money order or cashier’s check:
You will pay the 1% tax.

If you use an online remittance service linked to your U.S. bank account or card:
You are exempt from the tax.

Practical Example

Let’s say Priya is an H-1B visa holder from India 🇮🇳 working in the United States 🇺🇸. She sends $1,500 home every month. Here’s how the tax affects her:

• If Priya pays cash at a money transfer office: She pays $15 extra in tax each month.
• If Priya uses her U.S. bank’s online transfer service: She pays no tax.
• If Priya uses a debit card from her U.S. bank on a remittance app: She pays no tax.

This example shows that the tax mostly affects people who use cash or informal ways to send money.

Why Do Some People Still Use Cash or Informal Transfers?

Some people prefer cash or informal channels because:

• They may not have a U.S. bank account.
• Their families in their home country may not have bank accounts.
• They may not trust banks or want to avoid paperwork.
• Informal channels sometimes offer better exchange rates or faster service.

However, these methods are now more expensive due to the 1% tax.

What About Green Card Holders and Students?

The tax applies to all non-U.S. citizens, including:

• Green card holders who are not yet citizens
• Foreign students on F-1, H-2A, or other visas

If they use cash or informal channels, they pay the tax. If they use banks or cards, they are exempt.

How Does the Tax Compare to the Original Proposal?

The first version of the bill in the House of Representatives suggested a much higher tax: 3.5% on all remittances. After debate, the Senate reduced the tax to 1% and added exemptions for bank and card-based transfers. This change was welcomed by many immigrant groups and financial experts, as it reduces the burden on people who use formal channels.

What Do Experts and Stakeholders Say?

Tax experts say the tax will mostly affect people who use cash or informal channels. They point out that most H-1B visa holders and other immigrants already use banks or online services, so the impact will be limited for them.

Immigrant advocacy groups and diaspora organizations have mixed feelings. They worry about the extra cost for people who rely on cash transfers, especially those who send small amounts home to support family. However, they also note that the lower tax rate and the exemptions for banks and cards are helpful.

Remittance companies like Western Union and MoneyGram will need to update their systems to collect the tax on cash and money order transfers.

Banks and online remittance platforms are expected to see more business as people switch to tax-exempt methods.

Summary Table: How the 1% Remittance Tax Applies to H-1B Visa Holders

What Should H-1B Visa Holders Do Now?

If you are an H-1B visa holder who sends money abroad, here are some steps you can take:

• Review your current remittance method: If you use cash or informal channels, consider switching to a U.S. bank, credit union, or card-based transfer to avoid the tax.
• Open a U.S. bank account: If you do not already have one, opening a bank account can help you use tax-exempt transfer methods.
• Talk to your family: Make sure your family in your home country can receive money through bank transfers or online platforms.
• Compare remittance services: Some online platforms offer better exchange rates or lower fees than traditional banks.
• Stay informed: The law takes effect for transfers after December 31, 2025. Make any needed changes before then.

What If You Need Legal or Tax Advice?

If you are unsure how the tax affects you, or if you have a special situation, it is a good idea to talk to a tax attorney or immigration specialist. Professionals like Edward Hild and Sahel A. Assar at Brownstein Hyatt Farber Schreck LLP are advising clients on the OBBB and its tax rules.

Where Can You Find Official Information?

For the full text of the law and official updates, visit the U.S. Congress website for H.R.1 – One Big Beautiful Bill Act. This site provides the latest information on the law and any changes that might happen in the future.

As reported by VisaVerge.com, the 1% remittance tax under the One Big Beautiful Bill Act is designed to target cash and informal transfers, while leaving most electronic and bank-based transfers untouched. This approach encourages the use of formal financial systems and reduces the burden on most H-1B visa holders and other non-citizens who already use banks or cards.

Key Takeaways

• The 1% remittance tax applies to H-1B visa holders and other non-citizens sending money abroad using cash, money orders, cashier’s checks, or informal agents.
• Electronic transfers through U.S. banks, credit unions, or U.S.-issued cards are exempt from the tax.
• The tax takes effect for transfers made after December 31, 2025.
• Switching to formal, regulated financial channels can help you avoid the tax.
• If you have questions, consult a tax or immigration professional.

By understanding these rules and planning ahead, H-1B visa holders and other non-citizens can continue to support their families abroad while minimizing extra costs. Always use official sources and trusted professionals for the most accurate and up-to-date advice.

Learn Today

One Big Beautiful Bill Act → A 2025 law imposing a 1% remittance tax on certain money transfers made by non-U.S. citizens in the U.S.
H-1B Visa Holder → A foreign professional legally working in the U.S. on a specialized occupation visa with temporary status.
Remittance Tax → A 1% excise tax on money sent abroad using cash, money orders, or informal channels under the OBBB law.
Cashier’s Check → A bank-issued check guaranteeing payment, subject to the 1% remittance tax if used for money transfers.
Informal Transfer → Unregulated transfer methods like hawala involving informal agents, subject to the 1% remittance tax.

This Article in a Nutshell

The One Big Beautiful Bill Act introduces a 1% remittance tax impacting H-1B visa holders using cash or informal money transfers. Effective after December 31, 2025, electronic transfers through U.S. banks or licensed institutions remain exempt, encouraging secure and cost-efficient remittance methods for foreign workers.
— By VisaVerge.com