Are Remittances Taxed? Excise Tax, Gift Rules, and Reporting

Whether remittances are taxed depends on how you send the money, how much you send, and which side of the transfer you are on. Starting January 1, 2026, a new 1% federal excise tax applies to international remittances funded with cash, money orders, or cashier’s checks. Separately, the money itself can trigger gift tax for the sender, income tax for the recipient if it isn’t really a gift, and federal reporting requirements once certain dollar thresholds are crossed.

The New 1% Excise Tax on International Transfers

The One, Big, Beautiful Bill Act, signed on July 4, 2025, created a 1% excise tax on qualifying international remittances sent from the United States to a recipient in a foreign country.¹ It takes effect January 1, 2026. Send $2,000 abroad with a qualifying payment method and $20 in tax is added on top of the provider’s fees.

The sender owes the tax, but the remittance transfer provider collects it at the point of sale and forwards it to the IRS. If the provider doesn’t collect, the provider owes it.¹ There is no minimum dollar amount. Any qualifying international transfer is taxed regardless of size.

Which Transfers Are Taxed

The tax applies only when the sender pays with a physical instrument:

Cash — paper currency or coins handed to the transfer provider
Money orders from any issuer
Cashier’s checks or similar physical instruments identified by the IRS

These are the methods most common at walk-in remittance storefronts.¹

Which Transfers Are Not Taxed

The excise tax does not apply if the transfer is funded from:

A U.S. bank account
A debit card issued in the United States
A credit card issued in the United States

Using an app or online platform linked to a U.S. bank account or U.S.-issued card avoids the 1% tax entirely.¹ The tax also does not touch domestic transfers, because the statute reaches only transfers going to a foreign recipient.

Gift Tax When You Send Money to Someone

Money sent as a personal gift, whether across town or across a border, may fall under federal gift tax rules. Gift tax is owed by the giver, not the recipient.²

For 2026, you can give up to $19,000 per recipient with no gift tax and no filing requirement. This annual exclusion resets each calendar year.³ A married couple giving together can send up to $38,000 to the same person, since each spouse has a separate exclusion.

Cross the $19,000 line for any single recipient and you must file IRS Form 709. Filing does not automatically mean you owe tax. The excess amount counts against your lifetime gift and estate tax exemption, which for 2026 is $15,000,000 per individual.³ Actual gift tax kicks in only after your cumulative lifetime gifts above the annual exclusion exceed that $15 million ceiling.

Tuition and Medical Payments Paid Directly

Paying tuition directly to a school or paying a medical bill directly to the provider is fully excluded from gift tax and does not use up any part of your $19,000 annual exclusion or lifetime exemption.⁴ The payment must go straight to the institution or provider. Sending the money to the student or patient first does not qualify.

Gifts to a Non-Citizen Spouse

Gifts between U.S.-citizen spouses are unlimited, but that unlimited marital deduction does not apply when the spouse is not a U.S. citizen. For 2026, you can give up to $194,000 to a non-citizen spouse before the transfer starts counting against your lifetime exemption.³

Income Tax When You Receive a Remittance

Money received as a gift, including remittances from family abroad or in the United States, is generally not taxable income. Federal law excludes gifts from the recipient’s gross income.⁵ You do not report the funds on your tax return and you owe nothing on them, regardless of amount.

The exclusion depends on the transfer actually being a gift. The sender must give the money voluntarily, without expecting labor, services, or goods in return. Regular support from a parent to an adult child clearly qualifies. Payment for consulting work, freelance projects, or property does not, even if it is dressed up as a gift. Compensation is taxed at ordinary federal rates ranging from 10% to 37% depending on total annual income.

Employer payments to employees can never qualify as tax-free gifts, no matter what label the employer uses.⁵

Reporting Large Foreign Gifts on Form 3520

A U.S. person who receives large gifts from someone outside the United States may have to report them to the IRS, even though the gifts themselves are not taxable. Thresholds depend on the source:

Gifts from a foreign individual or foreign estate: file Form 3520 if the total from that person, or related persons, exceeds $100,000 in a single tax year.⁶
Gifts from foreign corporations or partnerships: file if the combined total from all foreign entities exceeds the annual inflation-adjusted threshold ($19,570 for 2024). Each gift and its sender must be identified.⁶

You will need the exact dollar amount of each transfer, the date it arrived, and information about the sender, including whether it is an individual, corporation, partnership, or estate. Form 3520 is filed separately from your regular tax return and mailed to the IRS Service Center in Ogden, Utah. The deadline is April 15 for calendar-year filers. If you live abroad and qualify for the automatic two-month extension, it moves to June 15. A general tax extension pushes it to October 15.⁷ Form 3520 is an information return. Filing it does not create a tax bill.

Foreign Account Reporting (FBAR)

If remittance funds are deposited into an account outside the United States and the combined balance of all your foreign accounts tops $10,000 at any point in the year, even for a single day, you must file FinCEN Form 114, the FBAR.

The FBAR is filed electronically through the BSA E-Filing System run by the Financial Crimes Enforcement Network.⁸ Individuals can file without creating an account. The deadline is April 15, with an automatic extension to October 15; no extension request is needed. Save your confirmation and supporting records for at least five years.

Bank Reporting and Structuring

Financial institutions have their own reporting duties under the Bank Secrecy Act. Any cash transaction over $10,000, including a remittance, triggers a Currency Transaction Report the bank or transfer provider files automatically with FinCEN.⁹ Multiple cash transactions on the same day that add up to more than $10,000 are combined for reporting.

You don’t do anything when a CTR is filed. But deliberately splitting transactions into smaller amounts to stay under the threshold is a federal crime called structuring.⁹ Sending $4,000 three days in a row instead of $12,000 at once, if the intent is to avoid reporting, can lead to criminal prosecution even though the underlying transfers are legal.

Banks and remittance providers may also file Suspicious Activity Reports when patterns look unusual. You are not notified, and trying to find out is itself a violation.

Penalties for Missing a Report

Penalties for skipping these reports often dwarf what filing would have cost.

Form 3520

Failure to report a foreign gift on Form 3520 carries a penalty of 5% of the unreported amount for each month the return is late, capped at 25%. On a $200,000 unreported gift, that starts at $10,000 for month one and reaches $50,000 by month five. If the IRS sends notice and you still don’t file within 90 days, an additional $10,000 penalty applies for each subsequent 30-day period.¹⁰

FBAR

FBAR penalties turn on whether the violation was willful. A non-willful violation carries a civil penalty of up to $10,000 per unreported account, adjusted upward for inflation each year. A willful violation, meaning you knew about the requirement and ignored it, jumps to the greater of $100,000 or 50% of the highest balance in the account.¹¹ Willful violations can also bring criminal prosecution, fines up to $250,000, and up to five years in prison.

No penalty applies where you had reasonable cause and properly reported the balance. If you are unsure whether your foreign accounts crossed $10,000, filing the FBAR is the safer choice. There is no cost to file, and no tax is owed simply for holding the account.

1
Office of the Law Revision Counsel. 26 USC 4475 – Imposition of Tax
2
Office of the Law Revision Counsel. 26 USC 2501 – Imposition of Tax
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill
4
Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts
5
Office of the Law Revision Counsel. 26 USC 102 – Gifts and Inheritances
6
Internal Revenue Service. Gifts from Foreign Person
7
Internal Revenue Service. Instructions for Form 3520
8
Financial Crimes Enforcement Network. How Do I File the FBAR?
9
Financial Crimes Enforcement Network. A CTR Reference Guide
10
Internal Revenue Service. International Information Reporting Penalties
11
Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties