New 1% US Remittance Tax from 2026

🇺🇸💸 New 1% US Remittance Tax from 2026 — Will Your Transfers to Korea Be Hit?

If you live in the U.S. and regularly send money to family in Korea, there is a brand-new rule you can’t ignore.
Under the One Big Beautiful Bill Act (OBBBA), the U.S. is introducing a 1% federal excise tax on certain outbound remittance transfers starting January 1, 2026.
For many years the rule of thumb was simple: the act of sending money overseas was not taxed — only gift, estate, and foreign account rules mattered.
Beginning in 2026, however, the way you fund the transfer can trigger a separate 1% tax on top of normal fees and exchange-rate costs.

📚 Table of Contents

1️⃣ Big Picture — What Changed Under OBBBA?
2️⃣ Who Is Covered? (Citizens, Green-Card Holders, Visa Holders)
3️⃣ When Does the 1% Tax Apply? (Cash vs Account-Funded)
4️⃣ Practical Examples: US → Korea Transfers in 2026
5️⃣ How the Remittance Tax Interacts with Gift Tax & Reporting
6️⃣ EA Practice Tips: Minimizing the 1% Hit
7️⃣ Open Questions & Why This Article May Need Updates

1️⃣ Big Picture — What Changed Under OBBBA?

The One Big Beautiful Bill Act, signed into law on July 4, 2025, added new Internal Revenue Code section 4475. That section creates a federal excise tax on certain outbound remittance transfers from the U.S. to foreign recipients.

Effective date: Transfers made after December 31, 2025 (practically, 2026 and later).
Rate: 1% of the transfer amount itself (not just the fee).
Who pays it? Technically, remittance transfer providers must collect and remit, but the tax will be passed on to senders as an extra cost.
Reporting: Providers file Form 720 (Quarterly Federal Excise Tax Return) and make semimonthly deposits.

Important: This 1% excise tax is separate from income tax, gift tax, or any foreign account reporting rules. Even if your transfer does not create gift-tax or reporting issues, it may still be subject to the new remittance tax if it fits the funding rules discussed below.

2️⃣ Who Is Covered? (Citizens, Green-Card Holders, Visa Holders)

Early political messaging suggested this tax would mainly target undocumented immigrants or non-residents.
The final law, however, does not limit the tax by immigration status.

U.S. citizens
Green-card holders (lawful permanent residents)
Non-immigrant visa holders (F-1, H-1B, L-1, etc.)
Other individuals using U.S. accounts or U.S.-based money transfer services

If you initiate a qualifying transfer from the U.S., you can be within the scope of the 1% tax regardless of your passport.

3️⃣ When Does the 1% Tax Apply? (Cash vs Account-Funded)

The most important concept is how the law defines a “remittance transfer” that is subject to the excise tax.
The tax only applies when the sender funds the transfer with certain physical instruments.
According to the statutory summary and IRS guidance:

Tax applies when the sender provides:
- Cash
- Money order
- Cashier’s check
- “Other similar physical instruments”
Tax does not apply when funds are:
- Withdrawn from an account at a bank, credit union, or certain other financial institutions; or
- Provided via a U.S.-issued debit or credit card.

Gray areas: At the time of writing (November 2025), there are still unanswered questions:
for example, how different fintech apps will categorize transfers, and how “hybrid” funding (partial cash, partial account) will be treated. The IRS has acknowledged implementation challenges and is offering limited penalty relief for providers in the first three quarters of 2026 while systems are being updated.

3️⃣ Related EA Tax Guide Mini-Books

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4️⃣ Practical Examples: US → Korea Transfers in 2026

Let’s look at common ways Korean families move money and how the 1% tax might apply in practice.

🧮 Example 1 — Online international wire from your US bank to a Korean bank

You initiate a transfer from your U.S. checking account through your bank’s app.
The funds are pulled directly from your account balance.
Under the statute, account-funded transfers are excluded from the remittance excise tax.
You still pay normal bank wire fees and face exchange-rate spreads, but not the 1% remittance tax, assuming your bank treats it as an excluded transaction.

🧮 Example 2 — Cash transfer at a walk-in remittance shop

You bring $2,000 in cash to a money transfer counter and send it to your parents in Korea.
This is the classic case where the new law does apply.
The provider will need to add a 1% excise tax ($20) on top of its usual fees and remit that tax to the IRS.

🧮 Example 3 — Cashier’s check used to fund the remittance

You obtain a cashier’s check from your bank for $50,000 and hand it to a remittance provider to send to Korea.
Because a cashier’s check is specifically named in the law, this transfer is within the 1% excise tax base.
You could see an additional $500 remittance tax on top of normal transfer costs.

🧮 Example 4 — Fintech app funded by a US debit card

You use a popular app to send money to a Korean bank account and choose your U.S. debit card as the funding source.
The statute says transfers funded with a U.S.-issued debit or credit card are not subject to the 1% tax.
However, you still need to confirm with the provider how they categorize the transaction and whether any hidden charges are being labeled as “tax.”

5️⃣ How the Remittance Tax Interacts with Gift Tax & Reporting

The 1% remittance tax sits on top of the traditional rules you may already know:

Annual gift tax exclusion — For 2025 and 2026, you can generally give up to
$19,000 per recipient per year without gift tax or a gift-tax return. Married couples can “split” gifts and effectively double that to $38,000 per recipient.
Lifetime estate and gift exemption — About $13.99 million per person in 2025, increasing to $15 million in 2026, covering taxable gifts plus your estate at death.
Form 3520 — If a U.S. person receives more than $100,000 in gifts or inheritances from foreign individuals or estates in a year, they may need to report this on Form 3520.
FBAR (FinCEN 114) — If your foreign financial accounts (including Korean accounts) exceed $10,000 in aggregate at any time in the year, you must file an FBAR, even if there is no income tax due.

Key point: The remittance tax is triggered by how you fund the transfer.
Gift tax and reporting are triggered by how much you give and where it sits.
It is entirely possible to:

avoid gift tax but still pay the 1% remittance tax, or
avoid the 1% tax but still have gift/FBAR reporting duties.

6️⃣ EA Practice Tips: Minimizing the 1% Hit

✅ Tip 1 — Prefer account-funded transfers where possible
Whenever feasible, initiate international transfers directly from a U.S. bank or credit union account, or fund them with a U.S.-issued debit/credit card. As currently written, these methods fall outside the
1% remittance excise tax base.

✅ Tip 2 — Watch the “fee vs tax” breakdown on receipts
After January 1, 2026, review the fee disclosure carefully. You may see separate lines for service fees, exchange margin, and now federal excise tax.
Keeping receipts will help you understand your true costs and answer questions later.

✅ Tip 3 — Don’t assume the 1% is deductible
For most individual taxpayers, this excise tax is simply an additional personal expense.
It generally is not deductible on a personal Form 1040 and does not automatically become a business deduction unless the transfer is clearly tied to a trade or business and meets all the usual rules.

✅ Tip 4 — Consider timing for large transfers
If you are planning a one-time, large transfer (for example, a house down payment in Korea), the difference between a cash-funded remittance and an account-funded wire could mean hundreds or thousands of dollars in extra tax. Talk with your EA or CPA before finalizing the method.

7️⃣ Open Questions & Why This Article May Need Updates

⚠️ Still evolving — please read this part

The IRS is still issuing guidance for remittance transfer providers on how to collect and deposit the tax.
Some practical details for fintech apps and hybrid transactions remain unclear.
There have been discussions in Congress about changing the rate or scope in future “fix” bills.

This article reflects U.S. federal law and published guidance as of November 2025.
Implementation details and enforcement priorities may change, and individual providers may apply the rules differently at first. Always confirm the latest rules and your own situation with a qualified tax professional.

📚 EA Tax Guide Internal Links

This article is based on U.S. federal tax law and guidance available as of November 2025. State tax rules and foreign tax rules (including Korean law) may differ.
The information here is for general educational purposes only and does not constitute legal or tax advice. For decisions involving significant transfers, always consult directly with an Enrolled Agent (EA), CPA, or qualified tax attorney who can review your specific facts.

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