The 2026 Remittance Tax: What It Is and How to Legally Avoid It

Since January 2026, a new 1% federal tax applies to certain international money transfers. If you heard about this and worried, here is the most important thing to understand right away: if you send money from a U.S. bank account or a U.S.-issued debit card, you pay zero tax. The 1% only applies when you pay with physical cash at a counter. This guide explains exactly what the tax is, who is actually affected, how to open a bank account with an ITIN to qualify for the exemption, and which services to use so every dollar you send reaches your family.

What Is the 2026 Remittance Tax?

On January 1, 2026, Section 4475 of the Internal Revenue Code took effect as part of the One Big Beautiful Bill Act, signed on July 4, 2025. The law creates a 1% federal tax on international money transfers funded with cash, money orders, or cashier's checks. This is not a service fee — it is a federal tax that the transfer provider withholds and remits to the government on your behalf.

The original proposal was a 5% tax. Immigrant advocacy organizations pushed hard during the legislative debate and succeeded in reducing it first to 3.5% and finally to 1%. The Joint Committee on Taxation estimates it will generate approximately $10 billion in federal revenue over 10 years.

One thing worth noting: this tax applies to everyone in the United States regardless of immigration status. A U.S. citizen paying cash at a Western Union counter pays the exact same 1% as an undocumented immigrant. Nobody is exempt when using cash — but everyone has equal access to the exempt payment methods.

Who Is Actually Affected?

The 1% tax applies to people who use these methods to send money abroad:

Cash at a counter: Going to a Western Union, MoneyGram, Walmart Money Center, or other transfer agent and paying with bills. This is still the most common method in the Latino community and the one that triggers the tax.

Money orders: Using a money order to fund an international transfer is also subject to the 1%.

Cashier's checks: Also pay the 1% when used for international remittances.

The tax does NOT apply if you use a U.S. bank or savings account, a debit card issued by a U.S. bank, a credit card issued in the U.S., or Apple Pay and Google Pay linked to a U.S. account or card.

In concrete terms: if you send $500 per month in cash for a full year, that is $5 in tax per transfer — $60 per year that does not reach your family. Send $1,000 monthly and that is $120 per year. The solution is not to stop sending money. The solution is to change how you pay.

The Key Exemption: Sending from a Bank Account

Section 4475(d)(1) of the Internal Revenue Code explicitly exempts electronic transfers funded from U.S. bank accounts or made with U.S.-issued cards from the 1% tax.

In practical terms: if you have a U.S. bank account and send money through Wise, Remitly, Xoom, or even the Western Union app, you pay zero 1% tax. Even if your family member picks up cash at a Western Union location in their country, as long as you paid from your U.S. bank account the exemption applies.

This is not a loophole or tax avoidance. Congress created this exemption deliberately for people who participate in the formal financial system. Using it is exactly what the law was designed to allow.

The account does not need to be at a major national bank. An account at a local credit union qualifies just as well. What matters is that the institution is regulated in the United States.

How to Open a Bank Account with an ITIN: Step by Step

Opening a bank account without a Social Security Number or while undocumented is completely legal in the United States. Several major banks allow it with an ITIN (Individual Taxpayer Identification Number). Here is the complete process:

**Step 1: Get your ITIN if you do not have one.** An ITIN is a tax identification number the IRS issues to people who need to file taxes but cannot obtain an SSN. Complete IRS Form W-7 together with your federal tax return and valid identity documents (a current passport works best). Processing takes 7 to 11 weeks. You can use an IRS-certified Acceptance Agent to avoid mailing your original documents.

**Step 2: Gather your documents.** To open a bank account in Florida with an ITIN you need: your ITIN assignment letter (IRS Form CP565), a current photo ID (passport or consular card from Mexico, Guatemala, Colombia, or the Dominican Republic), a Florida proof of address (utility bill or lease in your name), and your opening deposit (typically $25 to $100).

**Step 3: Go to a physical branch.** Visit a branch in person — do not try to open the account online only. Many online systems are not configured to accept ITIN even when the bank allows it in person. Tell the representative you have an ITIN and want to open a checking account. The banks most welcoming to ITIN holders in Florida are:

**Wells Fargo** has an explicit policy accepting ITIN. Ask for the Everyday Checking account — one of the most accessible options for immigrants in Florida.

**Bank of America** has a dedicated web page for non-citizens and accepts Mexican consular cards as ID.

**Chase** accepts consular cards as identification at Florida branches. Tell the representative you have an ITIN.

**Citibank** is especially useful if your family in Mexico benefits from its Banamex partner network.

**Credit unions and CDFIs** (Community Development Financial Institutions) are often the most flexible of all. Ask in your community which local credit union is known for working with immigrants.

**Step 4: Activate your debit card.** When you open your account the bank will give you a Visa or Mastercard debit card issued in the U.S. That card automatically qualifies as exempt from the 1% tax when you use it to send remittances. Once activated you can start sending money with no tax charge.

Best Services to Send Money from Your Account

With a U.S. bank account or debit card in hand, these are the most convenient services for sending remittances without the 1% tax:

**Wise** is the cheapest option for bank-funded transfers. It uses the real mid-market exchange rate with no markup. Fees range from 0.4% to 1.5% of the amount plus a small fixed charge. To send $500 to Mexico: between $2 and $7 total. Download their app and link your bank account or debit card.

**Remitly** is ideal for speed and simplicity. The first transfer is often free. After that, $3 to $5 flat for popular Latin American destinations. Choose Express (minutes) or Economy (1 to 3 days, lower cost). No 1% tax with a debit card or bank account.

**Xoom** (PayPal's international transfer service) offers competitive rates and broad Latin American coverage. Between $4 and $5 from a bank account. No 1% tax. Easy to use if you already have PayPal.

**Western Union and MoneyGram via app or website** remain the best option when your family member picks up cash because they have no bank account in their country. The key difference is how you pay: use their app or website with your U.S. debit card or bank account and you pay zero 1% tax — even if your family picks up cash.

Use Monito.com before each transfer to compare fees and exchange rates in real time. On a $500 transfer the difference between providers can be $10 to $20. Two minutes of comparison is worth it.

Frequently Asked Questions

**Does the 1% tax apply to all remittances?** No. It only applies to transfers funded with cash, money orders, or cashier's checks. Transfers from U.S. bank accounts, debit cards, credit cards, or digital wallets are completely exempt under Section 4475(d)(1).

**Can I avoid the tax if I do not have a bank account yet?** Yes — but you need to open one first. Banks in Florida that accept ITIN include Wells Fargo, Bank of America, Chase, and Citibank. Bring your ITIN letter, photo ID, and proof of address. Once your account is open you receive a debit card that qualifies automatically for the exemption.

**Will Western Union charge me the tax if I pay with my debit card at their store?** No. Debit card payments at Western Union locations and in their app are exempt from the 1% tax. Only physical cash at the counter triggers the charge.

**Is it legal to use these exempt methods?** Absolutely. Congress created these exemptions specifically for electronic payment methods. Using Wise, Remitly, or any other service with your bank account or debit card is not tax evasion — it is using an explicitly exempt payment method exactly as the law intended.

**Which is cheaper in 2026: Wise or Remitly?** Wise generally has the best exchange rate for amounts over $300. Remitly is more convenient for first transfers (often free) and mid-size amounts. Use Monito.com to compare in real time before each send.

**Does the 1% tax only apply to immigrants?** No. Section 4475 applies to everyone in the United States regardless of immigration status. All people pay if they use cash. All people are exempt if they use a bank account or U.S.-issued debit card.

The money you send home represents months of hard work. At Atton Finance we help you navigate these new rules so every dollar reaches your family. If you need guidance opening a bank account with your ITIN, choosing the right remittance service, or understanding your financial options as an immigrant in Florida, our advisors speak Spanish and know your reality. **Schedule a free consultation with an Atton Finance advisor.**

*This article is for informational and educational purposes only. It does not constitute legal, tax, or financial advice. Service fees mentioned are approximate as of the publication date and may change. Consult a certified professional for your specific situation.*