A new federal remittance tax set to take effect on January 1, 2026, is poised to significantly affect immigrant families in the United States. This 1% tax will apply to money sent abroad, adding a financial burden during a time when many families are already stretched thin, especially during the holiday season.
The United States remains the world’s largest sender of remittances, with an estimated $93 billion sent overseas in 2024. Much of this financial support comes from immigrant workers who rely on these funds to support families back home. In New York City, residents send approximately $10 billion annually to relatives abroad, incurring over $500 million in transfer fees alone. The new tax will extract an additional $100 million from these households, compounding existing financial pressures.
For individuals like Steve, a construction worker from Guatemala, remittances are a vital lifeline. He emphasizes the importance of sending money back home to his children, stating, “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.” With the new tax, sending $1,000 will incur an extra $10 fee. While this may seem minor, it represents a significant loss in purchasing power for families in countries like Guatemala, where every dollar counts.
The tax was introduced as part of former President Donald Trump‘s legislative package earlier this year. Under the new policy, the sender is responsible for the tax payment, which could deter families from using formal transfer channels. A previous iteration of the bill proposed a 5% tax specifically targeting non-citizens, but this was later revised to a flat 1% rate affecting all money sent abroad, regardless of immigration status.
The impact of this tax extends beyond just financial considerations. For many immigrants, navigating digital transfer services can be challenging. While platforms like Wise and Remitly are exempt from the tax, many prefer traditional methods such as cash transfers through locations like MoneyGram. Steve, for example, opts for cash transfers, feeling that he lacks the technical skills to utilize digital platforms effectively.
Other individuals, like Samia Fawad, a home-health aide from Queens, also express concerns about the new tax. Samia regularly sends money to her elderly parents in Pakistan, helping to cover their basic needs. She notes that switching to digital transfers to avoid the new tax comes with its own costs, citing a $9 fee on wire transfers, which can represent a significant amount in her parents’ local currency.
According to a 2025 survey by Visa, 67% of individuals prefer digital transfers to bank accounts, while 40% still rely on physical locations for money transfers. Ariel Tang, a tax accounting professor, elaborates on the financial strain this tax may impose, stating, “Adding a 1% increase can certainly be burdensome for immigrants when they transfer money.”
The newly imposed tax may discourage many from utilizing formal remittance channels altogether. The Center for Global Development, a nonpartisan think tank, warns that this tax could have broader implications, especially during peak sending seasons like the holidays. With the tax’s launch approaching, families are likely to increase remittances before the deadline.
Steve acknowledges the reality of the situation, stating, “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.” As immigrant families prepare for the upcoming holiday season, the financial landscape grows increasingly complex, with the new remittance tax looming over those who are already struggling to make ends meet.
