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Tax drop for funds transfer abroad
The new remittance tax codified in President Trump’s ‘Big Beautiful Bill’ Act was originally introduced at 5% in the first version of the bill to fund his second-term agenda; it includes an estimated $170 billion dedicated to immigration enforcement and border-related operations. The tax was then reduced to 3.5%, and passed at 1% in the final reconciled bill.
While previous versions of the tax applied only to non-U.S. citizens, the new tax applies to all individuals (citizens and non-citizens) sending remittances via cash transfers, money orders, or cashier’s checks. Money transfers made through US bank accounts and those funded by US-issued debit or credit cards will now be exempt from the tax.
The current tax, enacted under Trump’s Big Beautiful Bill on July 4, 2025, marks the first time Congress has successfully authorized a nationwide remittance levy.
Many Indian Americans send money back home to support family, pay for education, or contribute to community projects. Using cash-based services like money transfer agents or money orders will incur an additional 1% tax on top of service charges. Using a U.S. bank account or debit/credit card remains the most cost-effective and tax-free option.
This comes as welcome news to most Indian Americans. The earlier version of the bill required citizenship verification requirements to send funds abroad – provisions that had raised concerns about administrative burden and potential security risks.
India top recipient of funds transfers
In 2022, the United States sent over $80 billion in outward remittances, according to the World Bank, making it the largest source of global remittances. India, meanwhile, remains the world’s top recipient.
The remittance tax was seen as a way to keep more of the money sent by immigrant workers within the U.S. economy. The final watered-down tax has disappointed those on the right who have been pushing for stricter measures on both legal and illegal immigration.
The original proposal for a higher tax rate (5% or 3.5%) and exemptions for citizens (adding verification concerns) was reduced to 1% following lobbying efforts, particularly from the banking industry. But it will add to the roughly 6% migrants who already pay as fees to remittance service providers (such as Western Union or MoneyGram), banks, and money transfer apps, making the United States the most expensive of the G7 from which to send cash.
The tax hurts everyday Americans
Even at 1%, the financial industry remains skeptical about its value, Penny Lee, President and CEO, Financial Technology Association, told India Currents.
“A remittance tax is a double taxation that hurts everyday Americans and imposes a burden on common activities like sending money to a loved one abroad. Rather than making our financial system safer, it risks driving more transactions to unregulated channels and hindering our ability to combat transnational crime. While the provision included in the One Big Beautiful Bill was ultimately narrowed and improved, we believe a remittance tax is a flawed policy that will take us backward.”
Alternate money channels
According to the ODI Global, more immigrants will resort to informal ways to send money back to their families, by using Hawala in India, the Middle East, and other parts of Africa and Asia.
“Mexicans in the US make use of paqueteros (parcel carriers) – companies in the US that deliver cash and other items like electronic devices, clothing, shoes, documents, and even cash ‘right to your doorstep’. African migrants are increasingly turning to cryptocurrency to send money home.”
While informal channels provide an alternative (often illegal), they come with risks because there’s no guarantee the money will reach the intended recipient, and there’s a risk of fraud or exploitation by criminal groups.
At the end of the day, if migrants have to pay higher fees to send remittances to their family, they will have less money left for themselves, which could reduce their spending on goods and services and slow down economic growth here in the U.S.
This is an update to an earlier article published while the bill was undergoing reconciliation.