When President Trump’s signature “One Big Beautiful Bill” was passed by Congress last summer, it contained a new 1% tax on all cross-border money transfers originating in the U.S. The new tax took effect yesterday, on January 1, 2026.
While the Trump Administration’s intent with the remittance tax was to take a cut of funds that U.S.-based migrants send to their families back home, the new law has the potential to trip up expats living abroad. If you are living in Mexico and regularly move funds from a U.S. bank account to Mexico to fund your expenses, you need to understand how this new law works.
Below, I explain what kinds of transfers are subject to the tax and how to avoid it.
Which Money Transfers Will Now Be Taxed
The new U.S. tax applies to any remittance of money sent by physical means. In other words, paper funds such as cash, checks, or money orders will be assessed a 1% commission. This tax (which was thankfully reduced from 5% in the initial proposal) is added to the total value of the remittance – and is paid by the sender, not the recipient.
The financial institution brokering the transaction collects the tax and then passes it along to the U.S. Treasury.
To be clear, the identity of the sender and recipient makes no difference in whether you pay the tax. You can be a U.S. citizen, Mexican citizen, or citizen of some other country and still get hit with this tax — because it’s based solely on how the money transfer is funded.
Anyone moving their own funds across borders via digital transfer, e.g., those executed by money transfer services like Wise, Remitly, or Xoom, from digital wallets (Google or Apple Pay), or via direct bank-to-bank wires, won’t be subject to the new excise tax.
How a Sender Using Physical Cash Can Avoid Paying the Remittance Tax
Recognizing the economic pain this new tax could cause to thousands of lower-income Mexican citizens who rely on remittances from the U.S. to survive, the Mexican government created a workaround to lessen its impact.
A few weeks after the new remittance tax was signed into law last year, President Sheinbaum rolled out a new program for Mexican citizens and nationals who make frequent cross-border transfers. The program, called Finabien Paisano, offers participants a way to avoid the tax through the use of a remittance card.
Under this program, Mexican authorities assume responsibility for refunding the 1% tax on low-dollar cash transfers sent from the U.S. to Mexico. Rocío Mejía Flores, director of Financiera para el Bienestar, recently told El País newspaper, “Our task is to ensure that remittances arrive in full, safely, accessibly, and fairly to those who need them most, eliminating intermediaries that make sending money more expensive.”
Mexican citizens can access Finabien Paisano online or through a Mexican consulate abroad.
Western Union has also created a workaround with its own prepaid Visa card. Mexican customers who typically bring physical cash to Western Union retail stores in the U.S. can avoid the remittance tax by applying their cash to this reloadable card first, and then using it to send their money back to Mexico.
Now I’d be remiss if I didn’t mention that Western Union is generally not the fastest or cheapest way to move money across borders. Unless you receive a special teaser rate as a new customer, you are almost certainly better off using a money transfer service like Wise, which offers more competitive exchange rates.
But for those who continue to patronize Western Union out of habit or convenience, loading cash onto their prepaid Visa card can save plenty of money on remittances.
For anyone inexperienced at moving money across borders, finding the best rates is easier than it used to be. Learn more by checking out my previous article reviewing money transfer services.
Bottom line — by using digital-only money transfers, U.S. citizens living abroad can avoid having more of their hard-earned money land in the U.S. government’s hands.
