US 1% Remittance Tax on Money Sent to Mexico: Who Pays It
The new federal excise tax hits cash at the counter, not account-to-account transfers. What it means for money sent to family in Mexico City, as of November 2026.
Since January 1, 2026, the United States charges a 1% federal excise tax on remittance transfers when the sender pays the provider with cash, a money order, a cashier’s check or a similar physical instrument. Transfers funded from a bank account or with a US-issued debit or credit card are exempt. The tax is set out in Section 4475 of the Internal Revenue Code and collected by the transfer provider.
Which transfers to Mexico pay the 1% tax?
The tax depends on how the sender funds the transfer in the US, not on how the family in Mexico receives it.
| How the sender pays in the US | 1% tax? |
|---|---|
| Cash at a remittance counter or store | Yes |
| Money order or cashier’s check | Yes |
| Transfer funded from a US bank or credit union account | No |
| US-issued debit or credit card | No |
The IRS describes the tax as applying to transfers made after December 31, 2025 for which the sender provides cash, a money order, a cashier’s check or a similar physical instrument. The exemption in Section 4475(d) covers funds withdrawn from accounts at certain regulated financial institutions and transfers funded with US-issued debit or credit cards.
How much does it add to a transfer?
One percent of the amount sent. A cash remittance of USD 300 carries a USD 3 tax, and USD 1,000 carries USD 10, on top of the provider’s own fee and exchange rate margin. The provider collects the tax from the sender at the time of the transfer and pays it to the IRS.
What does it cost in practice?
| Amount sent | Funded with cash | Funded from a US bank account or US debit card |
|---|---|---|
| USD 200 | USD 2 tax plus provider fees | No tax; provider fees only |
| USD 500 | USD 5 tax plus provider fees | No tax; provider fees only |
| USD 1,500 | USD 15 tax plus provider fees | No tax; provider fees only |
The provider’s fee and its exchange rate margin usually cost more than the 1%, so compare the total pesos delivered rather than the tax alone. A transfer that avoids the tax but uses a poor exchange rate can leave the family with less money.
Are the IRS rules final?
Not entirely. The tax itself is in force, but the detailed regulations were still at the proposed stage when the IRS published them in Internal Revenue Bulletin 2026-18 in April 2026. The proposal treats traveler’s checks like money orders, treats a check cashed by the provider to fund a transfer as cash, and adds an anti-avoidance rule. The IRS also gave providers relief from late-deposit penalties for the first three quarters of 2026 in Notice 2025-55. The IRS bulletin with the proposed rules has the current text.
What is Mexico’s Finabien refund offer?
Mexico’s state development bank Financiera para el Bienestar (Finabien) announced in July 2025 that it would reimburse the 1% tax for cash remittances sent through its FINABIEN Paisano cards, on transfers of up to USD 400 a month, with the refund credited to the recipient’s FINABIEN Paisano Mexico card. Finabien also charges a fixed USD 2.99 for transfers between its US card and its Mexico card.
The US card is free with official ID (INE voter card, Mexican consular ID or passport), a phone number and an email, online or at Mexican consulates. In Mexico, the card is sold at Finabien branches. Finabien’s announcement did not spell out how and when refunds are credited, so check Finabien’s official page before relying on it.
How can families in Mexico City avoid the tax?
The simplest route is for the sender to fund the transfer from a US bank account or a US debit card. Options that work for recipients in the capital:
- A transfer into a Mexican bank account through the bank’s own international service or an app funded from a US account.
- A remittance app paid with a US debit card, with pickup or deposit in Mexico.
- Finabien’s card-to-card transfer for senders who use that system.
For the recipient, an account at a Mexican bank also makes it easier to receive money by SPEI and to compare rates. Our guides to sending money to Mexico and opening a bank account in Mexico cover CLABE numbers, fees and exchange rates.
This article explains the US tax and Mexico’s announced program and is not tax advice. The IRS and Finabien decide how their rules apply, and a tax professional can help with specific cases.
Bottom line
If a relative pays cash at a counter, moving the payment to a US bank account or debit card removes the 1%. If cash is the only option, ask whether Finabien’s refund applies and keep the receipts.
FAQ
Does the tax apply to money sent from Mexico to the US?
No. Section 4475 applies to remittance transfers sent from the United States by a sender who pays a US provider.
Do I need to report the tax on my own US return?
The provider collects the tax and files the returns with the IRS. Senders with questions about their own tax position should ask the IRS or a tax professional.
Does the person receiving the money in Mexico pay anything?
The US tax is collected from the sender when the transfer is made. The recipient may still face the provider’s payout fees or exchange margin.
Does the tax apply only to Mexico?
No. It applies to qualifying remittance transfers from the US to recipients in any foreign country.
