The 1% Cash Tax Is Live. If You Still Hand Over Cash, You're Paying It.

Why you should care: Since January 1, the U.S. has charged a 1% federal excise tax on international money transfers — but only on transfers funded with cash, money orders, or cashier’s checks. If you walk into an agent, hand over cash, and send it home, you now lose 1% on top of the fee.

The fix is mechanical: transfers funded digitally — bank account, debit card, or credit card — are exempt under the law (IRC Section 4475, part of the One Big Beautiful Bill Act signed July 2025). The rate started in Congress as a proposed 5%, dropped to 3.5%, and landed at 1%. Providers collect it automatically at the counter, so you won’t see a separate line item; it’s baked into the cash transaction.

Practical: On $500 sent in cash that’s $5 lost every single time — money that never reaches the people back home, for nothing in return. Funding the same transfer from a bank account or card avoids it entirely. If you’ve been sending cash through a storefront out of habit, switching to a digital-funded transfer is the whole move.

Risk note: This is separate from the $10,000 reporting rule (any single transfer that size is reported to the IRS regardless) and separate from gift-tax paperwork on very large annual totals. The 1% tax is small per transfer but it’s a recurring leak — the kind of cost that stays invisible until someone points at it.

[TWB compares digital-funded transfer options — including Wise — on our Sending Money page so you can see the all-in cost before you send.]

— TWB Newsroom