When Will the New 1% Remittance Tax Officially Take Effect?

Key Takeaways

• Senate draft proposes 1% tax on cash-based remittances over $15, exempting bank and card transfers.
• Tax applies unless sender proves US citizenship; compliance requires verifying citizenship and reporting.
• Original 5% proposal cut to 1% after criticism; concerns include costs, informal transfers, and compliance.

A new 1% remittance tax is making headlines in the United States 🇺🇸, with lawmakers in the Senate moving closer to passing the so-called “One Big Beautiful Bill Act.” The latest draft, released on June 28, 2025, proposes a 1% tax on certain money transfers sent abroad. This is a significant drop from the original 5% rate first suggested and the 3.5% rate included in the House version. The bill’s supporters say it will help raise federal revenue, but many immigrant communities and remittance service providers are worried about the impact on families who depend on sending money home. As of now, the exact date when the 1% remittance tax will officially start has not been announced, since the bill is still working its way through the legislative process.

Let’s break down what this means, who will be affected, and what could happen next.

What Is the 1% Remittance Tax and Who Will It Affect?

The 1% remittance tax is a proposed federal tax that would apply to certain types of money transfers sent from the United States 🇺🇸 to other countries. The main goal is to collect extra revenue for the government. However, the tax does not apply to every kind of money transfer.

Here’s how the latest Senate draft defines the tax:

• Tax Rate: 1% of the amount sent abroad, down from earlier proposals of 5% and 3.5%.
• Applies To: Remittances sent using cash, money orders, cashier’s checks, or similar physical payment methods.
• Exemptions: Transfers made through bank accounts, US-issued debit cards, or credit cards are not taxed in the current draft.
• Minimum Amount: The tax only applies to transfers over $15.
• Citizenship Requirement: If the sender can prove US citizenship, the tax does not apply.

This means that people who use banks or cards to send money overseas will not pay the 1% remittance tax. But those who rely on cash or money orders—often people without easy access to banks—will see their costs go up.

Why Was the Remittance Tax Proposed?

The idea behind the remittance tax is to raise money for the federal government. Lawmakers have argued that billions of dollars leave the United States 🇺🇸 every year through remittances, much of it sent by immigrants to support families in their home countries. Supporters of the tax believe that a small fee on these transfers could help fund government programs without raising other taxes.

However, the proposal has faced strong criticism. Many say it unfairly targets immigrant communities, who often send a large part of their earnings to relatives abroad. Critics also worry that the tax could push people to use unregulated or unsafe ways to send money, making it harder to track financial flows and protect consumers.

How Did the Tax Rate Change Over Time?

The remittance tax has gone through several changes since it was first introduced:

• Original Proposal: A 5% tax on non-commercial money transfers sent abroad, mainly affecting non-US citizens.
• House Version: The rate was reduced to 3.5% after pushback from advocacy groups and remittance providers.
• Senate Draft (June 28, 2025): The rate was cut again to 1%, and important exemptions were added for bank and card-based transfers.

These changes show that lawmakers are trying to balance the need for new revenue with the concerns of those who would be most affected by the tax.

What Are the Main Concerns About the 1% Remittance Tax?

Many groups have spoken out against the remittance tax, including immigrant rights organizations, financial institutions, and remittance service providers. Their main concerns include:

• Increased Costs for Immigrants: Many immigrants send money home to support family members. Even a 1% tax can add up, especially for those who send money regularly.
• Compliance Burden: Financial institutions would have to check the citizenship status of senders, deduct the tax, and report transaction data to the US Treasury. This could mean more paperwork and higher costs for businesses.
• Risk of Informal Transfers: If sending money through official channels becomes too expensive or complicated, people might turn to informal or unregulated methods. This can make it harder to track money flows and protect consumers from fraud.
• Disproportionate Impact on the Unbanked: Many people who use cash or money orders to send remittances do so because they don’t have access to banks. The tax could hit these groups the hardest.

According to analysis by VisaVerge.com, the Senate’s decision to exempt bank and card-based transfers is an attempt to address some of these worries. By making it cheaper to use formal financial channels, lawmakers hope to keep remittances safe and easy to track.

How Would the Tax Work in Practice?

If the “One Big Beautiful Bill Act” becomes law, here’s what would likely happen:

1. Identifying Remittance Transfers: Financial institutions and remittance service providers would need to figure out which transactions count as remittances under the law.
2. Checking Citizenship: For transfers over $15, the sender would have to prove US citizenship to avoid the tax. If they can’t, the 1% tax would be taken out automatically.
3. Reporting to the Treasury: Providers would have to report details of taxed transactions to the US Treasury, adding new compliance steps.
4. Collecting and Paying the Tax: The tax would be collected at the time of the transfer and sent to the government.

This process could mean longer wait times and more paperwork for people sending money, as well as higher costs for remittance companies.

Who Are the Key Stakeholders?

Several groups are watching the progress of the 1% remittance tax closely:

• Immigrant Communities: Many immigrants rely on remittances to support family members abroad. They worry about higher costs and more barriers to sending money home.
• Remittance Service Providers: Companies that help people send money overseas could face new compliance costs and lose customers if the tax makes their services less attractive.
• Financial Institutions: Banks and credit unions would need to update their systems to check citizenship and report transactions, which could be expensive and complicated.
• US Senate and House: Lawmakers are trying to find a balance between raising revenue and protecting vulnerable groups.
• Advocacy Groups: Organizations that work with immigrants and low-income communities are pushing for more exemptions and protections.

What Are the Policy Implications?

The 1% remittance tax could have several effects on the way people send money abroad:

• Encouraging Formal Channels: By exempting bank and card-based transfers, the bill could push more people to use regulated financial services. This might make remittances safer and easier to track.
• Burden on the Unbanked: Those without access to banks—often the most vulnerable—could end up paying more or facing new barriers.
• Compliance Challenges: Financial institutions would need to invest in new systems to check citizenship and report transactions, which could be costly and time-consuming.
• Risk of Informal Transfers: If the tax makes official channels too expensive, some people might turn to informal ways of sending money, which are harder to regulate and can be risky.

What Happens Next?

The “One Big Beautiful Bill Act” is still moving through the legislative process. The Senate’s latest draft, with the 1% remittance tax and new exemptions, is a sign that lawmakers are listening to concerns from immigrant communities and service providers. However, the bill has not yet been passed into law, and the official start date for the tax has not been announced.

Here’s what to watch for in the coming months:

• Final Senate and House Votes: Both chambers of Congress must agree on the final version of the bill.
• Presidential Signature: Once Congress passes the bill, it must be signed by President Biden to become law.
• Implementation Timeline: After the bill is signed, the government will announce when the tax will start and how it will be enforced.
• Possible Amendments: Lawmakers could still make changes to the tax rate, exemptions, or compliance rules before the bill becomes law.

For the latest updates on the bill’s progress, readers can check the official US Congress legislative information page.

How Can Affected Individuals Prepare?

If you or your family regularly send money abroad, it’s important to stay informed about the new tax and how it might affect you. Here are some steps you can take:

• Use Bank or Card-Based Transfers: If possible, switch to sending money through a bank account or with a US-issued debit or credit card. These methods are exempt from the 1% remittance tax in the current Senate draft.
• Keep Records: Save receipts and documentation for all remittance transfers. This can help if you need to prove your citizenship or challenge a tax deduction.
• Watch for Updates: The rules could change before the bill becomes law. Follow trusted news sources and official government websites for the latest information.
• Talk to Your Provider: Ask your remittance service provider how they plan to handle the new tax and what documentation you might need.

Real-Life Impact: Stories from the Community

For many families, remittances are a lifeline. Maria, a housekeeper in Texas, sends $200 each month to her parents in El Salvador. She uses a money order because she doesn’t have a bank account. Under the proposed 1% remittance tax, she would pay an extra $2 each month. While this might not sound like much, it adds up over time—especially for people living paycheck to paycheck.

Remittance service providers are also worried. “We serve a lot of customers who don’t have access to banks,” says a manager at a money transfer company in California. “If the tax goes through, we’ll have to update our systems, train our staff, and explain the new rules to our customers. Some people might stop using our services altogether.”

These stories show that even a small tax can have a big impact on people’s lives, especially those who are already struggling.

Summary Table: Key Facts About the 1% Remittance Tax

Conclusion and Next Steps

The proposed 1% remittance tax in the United States 🇺🇸 is a major policy change with far-reaching effects for immigrant communities, remittance service providers, and financial institutions. While the Senate’s latest draft aims to reduce the burden by lowering the tax rate and exempting bank and card-based transfers, many questions remain. The bill is still under review, and the official start date for the tax has not been set.

If you send or receive remittances, now is the time to learn about your options and prepare for possible changes. Stay in touch with your service provider, keep an eye on official updates, and consider switching to exempt transfer methods if you can.

For more detailed analysis and ongoing coverage, VisaVerge.com reports that the remittance tax debate is likely to continue as lawmakers seek a balance between raising revenue and protecting vulnerable communities. As the legislative process unfolds, all eyes will be on the Senate and House to see how the final version of the “One Big Beautiful Bill Act” shapes the future of remittances in the United States 🇺🇸.

Remember, you can always find the latest official updates and bill status on the US Congress legislative information page. Stay informed, ask questions, and make sure your voice is heard as this important policy moves forward.

Learn Today

Remittance → Money sent by immigrants from the US to support family in their home countries abroad.
One Big Beautiful Bill Act → Proposed legislation introducing a federal 1% tax on specific remittances sent abroad.
Citizenship Requirement → The obligation for senders to prove US citizenship to avoid paying the remittance tax.
Compliance → Legal and reporting duties financial institutions must follow to enforce the remittance tax.
Unbanked → Individuals without access to traditional banking services who often rely on cash or money orders.

This Article in a Nutshell

The US Senate’s latest bill draft proposes a 1% tax on certain remittances, exempting bank and card transfers. The goal is extra federal revenue. Critics warn of increased costs for immigrants, compliance challenges, and risks of informal transfers. The bill is under review with no implementation date announced.
— By VisaVerge.com