Key Takeaways
• OBBBA 2025 imposes a 3.5% excise tax on remittances by non-U.S. citizens, including H-1B visa holders.
• Banks and providers must withhold tax, verify non-citizen status, and report transfers to the IRS starting 2026.
• H-1B holders face higher costs, more paperwork, possible delays, and should seek tax or legal advice.
A sweeping new tax rule is set to reshape how non-U.S. citizens—including H-1B visa holders—send money abroad from the United States 🇺🇸. The One Big Beautiful Bill Act (OBBBA 2025), passed by Congress in July 2025, introduces a 3.5% excise tax on remittance transfers made by non-U.S. citizens through U.S.-based financial institutions. This change, expected to take effect in the next fiscal year, brings significant new IRS compliance requirements for both remittance providers and their customers. Here’s what you need to know about the new law, how it works, and what it means for H-1B visa holders and other immigrants who regularly send money to family or personal accounts overseas.
What Is the One Big Beautiful Bill Act and Who Does It Affect?
The One Big Beautiful Bill Act (OBBBA 2025) is a major tax reform package passed by the U.S. Congress in July 2025. While the bill covers a wide range of tax changes, one of its most talked-about features is the new 3.5% excise tax on remittance transfers. This tax applies to money sent from the United States 🇺🇸 to recipients in other countries by non-U.S. citizens, including:
- H-1B visa holders (temporary skilled workers)
- Green card holders (permanent residents who are not yet U.S. citizens)
- Other non-U.S. citizens living in the United States 🇺🇸
The tax is collected at the time of transfer by banks and other remittance providers, who must now identify which customers are subject to the tax and withhold the correct amount before sending the money abroad.
How the New Remittance Tax Works
The 3.5% Excise Tax
Under OBBBA 2025, any non-U.S. citizen who uses a U.S.-based financial institution to send money overseas will have 3.5% of the transfer amount withheld as an excise tax. For example, if an H-1B visa holder sends $1,000 to family in India 🇮🇳, the remittance provider will withhold $35 for the IRS, and only $965 will reach the recipient.
Who Collects the Tax?
The law requires “Qualified Transfer Providers”—which include banks, credit unions, and money transfer services—to collect and remit the tax to the IRS. These providers must update their systems to:
- Identify customers who are non-U.S. citizens
- Withhold the 3.5% tax on each qualifying transfer
- Report these transactions to the IRS
Who Is Exempt?
U.S. citizens are exempt from the remittance tax. The challenge for financial institutions is to distinguish between U.S. citizens and non-citizens. Currently, banks use Form W-9 to verify a customer’s tax status, but the new law may require additional documentation to ensure only non-citizens are taxed.
You can find the official Form W-9 here.
When Does the Tax Start?
Although the bill was passed in July 2025, the remittance tax is expected to take effect in the next fiscal year, likely starting in 2026. Financial institutions and the IRS are now working to update their systems and issue guidance before the rules go live.
Why Was This Tax Introduced?
The remittance tax is part of a broader effort to raise revenue and address concerns about untaxed money leaving the United States 🇺🇸. Lawmakers argue that non-citizens, including H-1B visa holders and green card holders, often send large sums abroad, and taxing these transfers can help fund other tax cuts and government programs included in OBBBA 2025.
However, critics say the tax unfairly targets immigrants and lawful residents who support families overseas. Many advocacy groups warn that the new rule could make it harder for immigrants to help loved ones, especially in countries where remittances are a lifeline.
IRS Compliance: What’s Changing for Remittance Providers?
New Compliance Burdens
The new law creates a major compliance burden for U.S. banks and remittance providers. They must now:
- Update internal systems to identify non-U.S. citizens
- Withhold the 3.5% tax on qualifying transfers
- Report remittance transactions to the IRS
- Request and verify additional documentation from customers
This means more paperwork, new software, and extra training for staff. The IRS will also need to strengthen its oversight to make sure the tax is collected correctly.
Documentation and Verification
Currently, banks use Form W-9 to confirm a customer’s U.S. residency status for tax purposes. Under the new rules, providers may need to request more documents—such as visas, green cards, or other proof of non-citizen status—to decide who pays the tax. This could mean longer wait times and more questions when sending money abroad.
IRS Guidance and Enforcement
The IRS and Treasury Department are expected to issue detailed guidance soon, explaining:
- How to define a “Qualified Transfer Provider”
- Who counts as a “Designated Recipient”
- What records must be kept
- How disputes will be handled
Until then, banks and remittance companies are preparing for a complex rollout, with the risk of delays or errors as everyone adjusts to the new system.
For the latest updates, you can visit the IRS official website.
Impact on H-1B Visa Holders and Other Immigrants
Higher Costs for Sending Money Home
For H-1B visa holders, who often send money to support family in their home countries, the new tax means higher costs. Every $1,000 sent abroad will now cost $35 more in taxes. Over time, this can add up, especially for those who send money regularly.
More Paperwork and Delays
Remittance providers will likely ask for more documents to prove your tax status. This could mean:
- Filling out extra forms
- Providing copies of visas or green cards
- Answering more questions at the bank or online
These steps may slow down the process and make it harder to send money quickly.
Possible Double Taxation
Some experts worry that the new tax could lead to double taxation. For example, if the money sent abroad is also taxed in the recipient’s country, families could lose even more of their hard-earned income.
Financial Planning and Legal Advice
H-1B visa holders and other non-citizens should consider speaking with a tax professional or immigration lawyer to:
- Understand how the new rules apply to their situation
- Explore any possible exemptions or planning strategies
- Make sure they stay in compliance with both IRS and immigration rules
As reported by VisaVerge.com, many immigrants are already seeking advice on how to manage the new costs and paperwork.
What Should H-1B Visa Holders Do Now?
Steps to Prepare
If you’re an H-1B visa holder or another non-U.S. citizen who sends money abroad, here’s what you can do:
- Check with your bank or remittance provider: Ask how they plan to handle the new tax and what documents you’ll need to provide.
- Keep good records: Save copies of all transfer receipts and any forms you fill out.
- Talk to a tax professional: Get advice on how the tax will affect you and whether you qualify for any exemptions.
- Plan for higher costs: Budget for the 3.5% tax when sending money overseas.
- Watch for IRS updates: Stay informed about new rules or guidance as they are released.
Questions to Ask Your Provider
- Will you need to fill out new forms or provide extra documents?
- How will the 3.5% tax be calculated and withheld?
- Can you see the tax amount before confirming your transfer?
- What happens if you think you were taxed by mistake?
Broader Context: Why Remittances Matter
Remittances—money sent by immigrants to family or personal accounts in their home countries—are a vital source of support for millions of families worldwide. According to the World Bank, remittances to low- and middle-income countries reached over $600 billion in 2023. For many H-1B visa holders and other immigrants, sending money home is not just a financial transaction—it’s a way to care for loved ones, pay for education, or support elderly parents.
The new tax could have ripple effects, not just for individuals but for entire communities that rely on this money. Advocacy groups warn that higher costs may force some to send less, hurting families in countries where remittances are a key part of the economy.
Stakeholder Perspectives: What Experts and Advocates Are Saying
Tax Professionals
Tax experts stress the need for clear IRS guidance. Kevin Brown, a partner at Anchin’s International Tax and Private Client Groups, points out that the details matter: “We need to know exactly who counts as a ‘Qualified Transfer Provider’ and what documentation will be required. Without clear rules, there’s a risk of confusion and mistakes.”
Financial Institutions
Banks and remittance companies are preparing for a major overhaul of their systems. They must train staff, update software, and communicate new requirements to customers. Some worry about the administrative burden and the risk of delays or errors, especially in the early months after the law takes effect.
Immigrant Advocacy Groups
Groups representing immigrants and visa holders have raised concerns about the fairness of the new tax. They argue that it singles out non-citizens and could make life harder for families who depend on money sent from the United States 🇺🇸. There are also worries about privacy, as more personal information may be collected and shared with the IRS.
Summary Table: Key Points of the New Remittance Tax
| Aspect | Details |
|---|---|
| Tax Rate | 3.5% excise tax on remittance transfers |
| Who Pays | Non-U.S. citizens in the U.S., including H-1B visa holders and green card holders |
| Tax Base | Money sent from U.S. financial institutions to foreign recipients |
| Who Collects | Remittance providers (banks, money transfer services) |
| Documentation | Likely more than just Form W-9; may include visas, green cards, etc. |
| Effective Date | Expected fiscal year 2026 or soon after enactment |
| Impact | Higher costs for senders, more paperwork, possible delays |
Looking Ahead: What Comes Next?
The IRS and Treasury Department will soon release detailed rules and instructions for banks, remittance providers, and taxpayers. Until then, affected individuals should:
- Stay in touch with their financial institutions
- Monitor official IRS announcements
- Seek professional advice if unsure about their status or obligations
The new remittance tax is just one part of the broader OBBBA 2025 reforms, which also include changes to estate taxes, business deductions, and more. But for H-1B visa holders and other non-citizens, the 3.5% excise tax on international money transfers is likely to have the most immediate and personal impact.
Where to Find More Information
For the latest updates and official guidance, visit the IRS website. If you need to verify your tax status or fill out required forms, you can access Form W-9 here.
If you have questions about your specific situation, consider reaching out to a tax professional or immigration lawyer. They can help you understand your obligations and plan for the changes ahead.
Final Thoughts
The One Big Beautiful Bill Act brings a major shift in how non-U.S. citizens, including H-1B visa holders, send money abroad from the United States 🇺🇸. With a new 3.5% excise tax on remittance transfers, higher costs and more paperwork are on the horizon. As implementation approaches, staying informed and prepared will be key for anyone affected by these changes.
Learn Today
Excise Tax → A tax charged on specific transactions, like remittance transfers, implemented here at 3.5% on transfers abroad.
H-1B Visa Holder → A non-U.S. temporary skilled worker allowed to live and work in the United States under visa regulations.
Qualified Transfer Provider → Banks or financial services authorized and required to collect and remit the remittance excise tax to IRS.
Form W-9 → IRS document used to verify U.S. taxpayer status, important for distinguishing citizens from non-citizens.
Remittance → Money sent by immigrants from the U.S. to support family or accounts in their home countries overseas.
This Article in a Nutshell
The 2025 One Big Beautiful Bill introduces a 3.5% remittance tax for non-U.S. citizens sending money abroad, impacting H-1B holders with higher costs and compliance. Banks must identify non-citizens and withhold taxes. This change demands preparation to avoid delays and plan finances accordingly.
— By VisaVerge.com
