The REMIT Act modifies the tax on remittance transfers, increasing the excise tax rate to 15% unless the sender is a verified U.S. citizen or national using a qualified provider, and establishes a refundable tax credit for U.S. senders who pay the tax.
John McGuire
Representative
VA-5
The REMIT Act significantly increases the excise tax on remittance transfers sent abroad by U.S. persons from 1% to 15%. This new tax is waived if the sender is verified as a U.S. citizen or national by a qualified money transfer provider. U.S. citizens who pay the tax can claim it back as a refundable income tax credit, subject to new reporting requirements for both senders and transfer companies.
REMIT Act Hikes Money Transfer Tax to 15%, But Offers Refund for U.S. Citizens
The “Requiring Excise for Migrant Income Transfers Act,” or the REMIT Act, is shaking up how we send money internationally. Currently, there’s a small 1% excise tax on remittance transfers, but this bill dramatically increases that rate to a whopping 15%. This isn’t just a small fee increase; it’s a massive jump that directly hits anyone sending money abroad, whether they’re supporting family overseas or paying a foreign contractor.
The 15% Tax Wall and the American Passport Loophole
Here’s the core mechanism: that new 15% tax applies to nearly all money transfers unless you can prove you’re a U.S. citizen or national. The bill creates a major exception: the tax is waived entirely if the money transfer company—now designated a “qualified remittance transfer provider”—verifies you as a “verified United States sender.” To become qualified, these transfer companies must sign an agreement with the Treasury Secretary promising to follow specific verification procedures. If you’re sending money and the company can confirm your citizenship, you bypass the 15% tax entirely at the point of sale. If you’re a verified citizen, this system works great for you.
Pay Now, Claim Later: The Refundable Credit Catch
What if you’re a U.S. citizen or national but the transfer provider isn't set up yet, or they fail to verify you? You still pay the 15% tax upfront. But the REMIT Act includes a new refundable income tax credit (Section 36C) that allows you to claim that money back when you file your annual taxes. Think of it like a massive sales tax you pay, then get reimbursed for later. To claim this credit, you must include your Social Security Number (SSN) on your tax return and provide proof that you actually paid the 15% tax and gave the transfer company the necessary certification. This sounds good in theory, ensuring citizens aren't ultimately penalized, but it creates a serious cash-flow issue and requires navigating an extra layer of tax paperwork.
The Real-World Friction for Senders and Companies
For regular people, this bill introduces administrative friction. If you’re a U.S. citizen sending $500 home every month, avoiding that initial $75 tax payment requires the transfer company to have their verification process locked down. If they don't, you’re out that $75 until tax season. For those who send money but aren't citizens, the 15% tax is permanent—a huge financial burden that could make formal money transfer services prohibitively expensive, potentially pushing people toward riskier, informal methods. Meanwhile, money transfer companies are slammed with new compliance costs. They must now track and report every detail to the IRS: which transfers were exempt, which were taxed, and the SSN and tax paid by every person intending to claim the credit. That’s a massive amount of new data collection and reporting, and those compliance costs usually get passed down to the consumer one way or another.