'Big, beautiful bill' includes a tax on remittances

Asian families depend on remittances from relatives in the US

Asian Americans sending money to their relatives in their home countries will face a new tax starting in 2026.

While some of the negative impacts of Donald Trump's "One Big Beautiful Bill" are garnering deserved attention: such as a shredding the safety net for lower income families, ioss of health care for millions, and more tax relief for the ultra-rich; going almost unnoticed is the new tax on remittances.

Asian immigrants working in the US play a critical role in the economies of many countries, providing that extra income that allows rfriends and elatives back in the home countries to keep food on the table, send their kids to school, or to pay for hospital care for ill family members.

“This bill will significantly affect Filipino workers who are not only making a living for themselves but also working hard to support their families back home in the Philippines,” Aquilina Soriano Versoza, executive director of the Pilipino Workers Center of Southern California (PWC told the Inquirer.

For every $100 sent to sisters and brothers remaining in India, the Phiippines and other Asian countries, the sender living in the US will pay $1 extra, or 1% of the total.

It could have been much worse. The original proposal in the US House of Representatives was 5% but they worked it down to 3.5%.Tthe Senate version of bill reduced the tax to 1%. The smaller payout was accepted by the House, which sent the final version in time for Trump to sign the bill on July 4th.

Thisnew tax will go into effect Jan. 1, 2026. The fee will be automatically deducted by remittance providers (banks, wire services, digital platforms) at the time of the transaction.

The tax will add to the roughly 6% senders already pay as fees to remittance service providers (such as Western Union or MoneyGram), banks and money transfer apps.

A recent analysis by the Center of Global Development of the financial costs of the  tax on countries that send migrants to the US found that it could sharply reduce formal remittances. Nations that will be significantly affected include India, Mexico, the Philippines, China, and Latin American and Caribbean countries like Guatemala, the Dominican Republic and El Salvador.

In 2023, India received the largest amount of remittances from the Indian glpbal diaspora, with an estimated $120 billion, according to the Migration Data Portal. Mexico and China followed, receiving remittances totaling $66 billion and $50 billion respectively.

Here's a summary of the new remittance tax

• Rate: The tax is 1% of the remittance transfer amount.
• Applies to: Individuals making transfers from the US to foreign recipients via a remittance transfer provider.
• Exemptions: Transfers funded with a US debit or credit card or funds withdrawn from certain US financial institutions (subject to BSA reporting) are exempt. Transfers made using bank wires or online transfer services are generally not subject to the tax, 
• Effective Date: The tax will apply to transfers made after December 31, 2025.
• Purpose: The tax is intended to increase Treasury revenue and deter illegal activities like drug and human trafficking, according to Bright!Tax.

US citizens who have retired abroad can breathe a sigh of relief. Their source of income from investments, Social Security and pensions will most likely not be affected.

What kind of transfers will not get hit with the 1% remittance tax?

Anything that is not a cash transfer, which includes transfers from your US bank account, retirement account, brokerage account, online, or using a debit or credit card. Below are some examples. A word of caution, this list isn’t exhaustive.

• Initiating an international wire transfer from your U.S. bank to your non-US bank account.
• Transferring your Social Security, 401(k), or IRA distributions from your US bank to your non-US bank account.
• Using WISE, Revolut, or any other online money transfer service to transfer money from the US to your country of residence.

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