U.S. Draft Law Lowers Remittance Tax to 1%, Exempts Bank Transfers

Key Takeaways

• Senate lowers remittance tax to 1%, applying only to cash, money order, and cashier’s check transfers.
• Tax affects non-citizens sending remittances after December 31, 2025, excluding bank and card transfers.
• The One Big Beautiful Bill Act aims to fund border security while reducing immigrant community impact.

A major change to the way immigrants send money abroad is taking shape in the United States 🇺🇸 Senate. On June 27, 2025, Senate Republicans released a new draft of the “One Big Beautiful Bill Act” that would sharply reduce the proposed remittance tax and limit who and what it affects. The revised plan lowers the tax rate from 3.5% to 1% and narrows its reach to only certain types of money transfers. If passed, this law could have a big impact on millions of immigrants, their families, and the global flow of money.

What’s Happening: The New Remittance Tax Plan

The U.S. Senate’s latest draft of the “One Big Beautiful Bill Act” proposes a 1% remittance tax—a fee charged when non-citizens send money out of the United States 🇺🇸. But unlike earlier versions, this tax would only apply to remittances sent in cash, by money order, or by cashier’s check. Transfers made through U.S. banks or with U.S.-issued debit or credit cards would be fully exempt.

Key facts:
– Who: Non-citizens (including H-1B visa holders, green card holders, international students, and other foreign nationals)
– What: 1% tax on cash, money order, or cashier’s check remittances only
– When: Applies to transfers made after December 31, 2025
– Where: United States 🇺🇸, affecting money sent abroad
– Why: To raise funds for border security and immigration enforcement, while responding to concerns from immigrant communities
– How: Remittance providers will collect the tax on eligible transfers and send it to the IRS

How the Senate’s Plan Differs from Earlier Proposals

The idea of a remittance tax has been debated for years, but the details have changed a lot over time. The first draft of the bill in the House of Representatives called for a 5% tax on all remittances sent by non-citizens, no matter how the money was sent. After strong pushback, the House lowered the rate to 3.5% but still included all types of transfers—cash, bank, card, and online.

The Senate’s new version, released on June 27, 2025, is much more limited:
– Tax rate cut to 1%
– Only cash, money order, and cashier’s check transfers are taxed
– Bank account and card-based transfers are exempt

This change came after heavy criticism from immigrant groups, especially the large Indian diaspora, who worried that a higher, broader tax would hurt families and investments back home.

Who Will Be Affected by the Remittance Tax?

The new remittance tax is aimed at non-citizens—people living in the United States 🇺🇸 who are not U.S. citizens. This includes:
– H-1B visa holders (skilled workers)
– Green card holders (permanent residents)
– International students
– Other foreign nationals on temporary visas

U.S. citizens and permanent residents are not subject to the tax.

But even among non-citizens, the tax only applies if they send money using cash, a money order, or a cashier’s check. Most people today use banks or online services to send money, so they will not have to pay the tax if they use these methods.

What Types of Transfers Are Taxed?

Taxed:
– Cash remittances (sending money in person, using cash)
– Money orders (prepaid paper forms used to send money)
– Cashier’s checks (checks issued by a bank, paid for in advance)

Not taxed:
– Bank account transfers (using a U.S. bank to send money)
– Debit or credit card transfers (using a card issued by a U.S. bank)
– Online remittance platforms that use U.S. bank accounts or cards

This means that most everyday remittances—especially those sent online or through banks—will not be taxed. The tax mainly targets people who use cash or other physical forms to send money, which is more common among those who do not have bank accounts.

Why Is the Remittance Tax Being Proposed?

Supporters of the remittance tax say it will help raise money for border security and immigration enforcement. They argue that non-citizens sending money abroad should help pay for the costs of the immigration system.

However, critics say the tax is unfair and could hurt immigrant families who rely on money sent from the United States 🇺🇸. They also warn that it could push people to use informal or underground ways to send money, making it harder to track and regulate.

How Will the Tax Work in Practice?

If the Senate’s plan becomes law, here’s how the process would work for non-citizens sending money abroad:

1. Choose Your Remittance Method
   • If you use a U.S. bank account or a U.S.-issued debit/credit card, no tax applies.
   • If you use cash, a money order, or a cashier’s check, a 1% tax will be taken from the amount you send.
2. Remittance Provider’s Role
   • The company or service you use to send money must check your citizenship status and the method you use.
   • If your transfer is taxable, the provider will deduct 1% from your remittance and send it to the IRS.
3. Documentation
   • You may need to show proof of your citizenship or residency status to avoid being taxed by mistake.
4. Reporting and Compliance
   • Remittance providers must report taxable transactions to the IRS, similar to how they already report large cash transactions.

For more details on how the IRS handles reporting and compliance, you can visit the official IRS website.

What Does This Mean for Immigrants and Their Families?

For many immigrants, sending money home is a lifeline for their families. In 2024, over 2.9 million Indians in the United States 🇺🇸 sent nearly $32 billion to India 🇮🇳, making up almost 28% of India’s total remittances. The United States 🇺🇸 is the world’s largest source of remittances, with more than $656 billion sent overseas in 2023 (World Bank data).

The Senate’s new plan is seen as a relief for most immigrants, since bank and card-based transfers are exempt. Lloyd Pinto, a partner at Grant Thornton Bharat, said, “This should come as a huge relief to the NRI community in the US. They will not be subject to this remittance tax if the remittances are made through accounts held with designated US banks and financial institutions or funded via debit or credit cards issued in the US.”

However, those who rely on cash or do not have access to banks could still be affected. Advocacy groups warn that the tax could hit the most vulnerable immigrants, especially those who are unbanked or undocumented.

Why Did the Senate Make These Changes?

The Senate’s decision to lower the tax rate and limit its scope came after strong opposition from immigrant communities and advocacy groups. Many argued that a higher, broader tax would unfairly punish immigrants and their families, and could even reduce the amount of money sent to countries that depend on remittances.

According to analysis by VisaVerge.com, the Senate’s changes reflect a compromise between raising funds for border security and avoiding harm to immigrant families. The new plan tries to focus the tax on less common, cash-based transfers, rather than everyday bank or online remittances.

What Are the Risks and Challenges?

While the Senate’s plan is less harsh than earlier versions, experts warn of several challenges:

• Compliance Burden: Remittance providers will have to check the citizenship status of senders and keep detailed records, which could be costly and complicated.
• Workarounds: Some migrants may try to avoid the tax by using U.S. citizen friends to send money, turning to cryptocurrencies, or using informal channels like hawala (an underground money transfer system).
• Enforcement: It may be hard for authorities to track and enforce the tax on cash-based transfers, especially if people use informal networks.

The Tax Foundation, a nonpartisan research group, warns that the tax could push more remittances underground, making it harder to monitor and regulate the flow of money.

Supporters vs. Critics: The Debate

Supporters of the remittance tax argue:
– It will raise money for border security and immigration enforcement.
– It ensures non-citizens contribute to the costs of the immigration system.

Critics say:
– The tax is unfair and targets immigrants.
– It could reduce the amount of money sent to families in need.
– It may drive remittances into unregulated, informal channels.
– It creates extra work and costs for remittance providers.

What Happens Next? The Legislative Path Forward

The Senate aims to pass the “One Big Beautiful Bill Act” by July 4, 2025, but the bill still needs to be reconciled with the House version. This means lawmakers from both chambers will have to agree on the final details before it can become law. Further changes are possible as advocacy groups and remittance providers continue to lobby for their interests.

If the bill is enacted, the remittance tax will apply to transfers made after December 31, 2025. Remittance providers and immigrants should watch for updates and prepare for possible changes in how they send money abroad.

Step-by-Step: What Should Immigrants Do Now?

1. Stay Informed: Follow updates from the U.S. Senate and trusted news sources for the latest on the bill’s progress.
2. Review Your Remittance Methods: If you usually send money using cash, a money order, or a cashier’s check, consider switching to a bank or card-based method to avoid the tax.
3. Talk to Your Remittance Provider: Ask about their procedures for checking citizenship status and collecting the tax.
4. Keep Documentation Ready: Be prepared to show proof of your citizenship or residency status if needed.
5. Consult Official Resources: For the latest legislative text and updates, visit the U.S. Senate’s official website.

Summary Table: Remittance Tax Provisions (Senate Draft, June 2025)

Looking Ahead: What’s at Stake?

The outcome of the remittance tax debate will shape the lives of millions of immigrants and their families, both in the United States 🇺🇸 and around the world. The Senate’s latest plan offers relief for most, but some—especially those without access to banks—could still face new costs.

As the bill moves forward, it’s important for immigrants, remittance providers, and advocacy groups to stay engaged and informed. The final law could still change, depending on negotiations and public pressure.

For now, the key takeaway is clear: If you send money abroad from the United States 🇺🇸, using a bank or card will likely keep you exempt from the new remittance tax. Those who rely on cash or similar methods should prepare for possible changes and consider safer, tax-free alternatives.

If you have questions about your specific situation, talk to your remittance provider or consult official government resources. Staying informed and proactive is the best way to protect yourself and your loved ones as these changes unfold.

Learn Today

Remittance → Money sent by immigrants from the U.S. to family or friends abroad, usually via banks or cash methods.
One Big Beautiful Bill Act → Proposed U.S. Senate legislation introducing a new limited remittance tax on specific money transfers by non-citizens.
Cashier’s Check → A check guaranteed by a bank, paid in advance, typically used as a secure payment method.
Non-citizen → An individual living in the U.S. without citizenship, including visa holders, green card holders, and international students.
IRS → Internal Revenue Service, the U.S. government agency responsible for tax collection and enforcement.

This Article in a Nutshell

The U.S. Senate’s revised remittance tax plan reduces the rate to 1%, limiting the tax to cash, money order, and cashier’s check transfers, exempting bank and card payments, protecting most immigrants who send money electronically abroad after December 31, 2025.
— By VisaVerge.com