JAKARTA - Donald Trump’s new 1% federal tax on cash remittances sent from the United States took effect January 1, 2026. The tax applies to money transfers made using cash, money orders, cashier's checks or similar physical payment methods. Bank transfers, debit card payments and credit card transactions are exempt.

The tax is part of the One Big Beautiful Bill Act signed by President Trump on July 4, 2025. Money transfer providers like Western Union and MoneyGram must collect the tax from senders and remit it to the US Treasury every quarter. The Joint Committee on Taxation estimates the tax will generate about $10 billion over the next decade.

For someone sending $500 monthly through a cash-based service, the tax adds $60 per year on top of existing transfer fees and exchange rate markups. The law applies to all senders regardless of citizenship status, including US citizens, green card holders, visa holders and undocumented migrants.

India, China and Mexico will see significant hits. Mexico alone could lose over $1.5 billion yearly, according to analysis by the Center for Global Development. The World Bank estimates that US-based remittances make up 97% of all money sent to Mexico, making it the country most dependent on transfers from the United States.

Out of the Southeast Asian countries, the Philippines stands to lose the most from Trump’s new remittance tax. 

The Philippine Department of Finance projects a $100 million annual loss, while the Asian Development Bank puts it at $250 million. 

Filipino workers sent $38.34 billion back home in 2024, accounting for 8.3% of the country's GDP. The United States is the largest source of these remittances.

The tax hits hardest at low-wage workers who already pay high fees. 

The global average cost for sending remittances was 6.4% in the fourth quarter of 2023 according to the World Bank, meaning senders lose $6.40 for every $100 transferred before factoring in exchange rates. 

Economists warn the tax could push remittances underground, and it’s been proven in history. Vietnam had a 5% remittance tax in the 1990s and found that formal transfers increased sharply after removing it in 1997. Tajikistan saw formal remittances jump from $78 million to $256 million in one year after eliminating its cross-border transaction tax in 2003.