U.S. President Donald Trump signed a bill on Friday introducing a 1% tax on international money transfers from the United States, effective after December 31, 2025. This new law specifically targets cash-based international remittances, including transactions made via cash, money orders, cashier’s checks, or other physical payment methods as designated by the Treasury Secretary. The law aims to boost federal revenue and address unregulated cash flows, with projections estimating annual revenue collection of $10 billion.
Under the new law, individuals sending money abroad will be responsible for paying the 1% tax. Remittance transfer providers—such as money transfer services—are tasked with collecting this tax and remitting it to the U.S. Treasury Department on a quarterly basis. If the tax is not collected at the time of the transaction, the transfer provider will be responsible for covering the amount. This tax applies to all individuals sending remittances via cash or similar methods, including both U.S. citizens and non-citizens.
However, the law exempts transfers made through debit or credit cards issued in the U.S., as well as funds withdrawn from accounts at financial institutions compliant with anti-money laundering regulations. The 1% tax rate is a reduction from the initially proposed 3.5%, which was adjusted during the legislative process to mitigate its impact. The law is expected to primarily affect individuals without bank accounts and communities reliant on cash-based transfers, while those using digital payment methods will remain unaffected.
The Nepali diaspora in the United States— which significantly contributes to Nepal’s economy through remittances—is expected to be notably impacted by this new tax. In 2023, Nepal received an estimated $11 billion in remittances, accounting for 26.6% of its GDP—surpassing both foreign aid and direct foreign investment. Of this, approximately $1.28 billion came from the U.S. alone.
According to data from Nepal Rastra Bank, between July and December 2024, Nepal received $4.73 billion in remittances, with a substantial portion originating from the U.S. Based on World Bank estimates, global remittances to low- and middle-income countries grew by 4.65% in 2024, reaching $685 billion. For Nepal, this translates to an estimated $11.3 to $11.8 billion in total remittances for 2024, with over $1 billion annually coming from the U.S. With the new 1% tax, a $1 billion remittance flow from the U.S. would incur an additional $10 million in taxes. For example, sending $1,000 to Nepal will cost an extra $10 in tax.
Currently, sending $200 from the U.S. to Nepal incurs an average cost of 3.64% (approximately $13.59 in fees and 0.35% in exchange rate margins), slightly above the United Nations’ Sustainable Development Goal target of 3%. The additional 1% tax will further increase this cost, potentially placing a heavier financial burden on Nepali remitters. For many, this could mean reduced disposable income for families in Nepal, where remittances play a critical role in poverty alleviation, education, healthcare, and rural economic development.
Remittances are a lifeline for Nepal’s economy. In 2022, 90% of Nepali adults accessed formal financial services, including 19 million using mobile wallets. However, challenges such as limited digital literacy and the use of informal channels by 10.4% of remitters hinder the full utilization of remittance inflows. A significant portion of remittances is withdrawn in cash, reducing the amount deposited into bank accounts and limiting the potential for long-term financial inclusion.
Support NepYork – Your Nonprofit News Media for the Nepali Community
NepYork, a 501(c)(3) nonprofit, is the Showcase of Nepalis in New York, delivering timely local news and vital resources on immigration, housing, taxes, health, business, and more. Our mission is to safeguard community journalism, amplify the voices of Nepali immigrants in NYC, and foster understanding, solidarity, and empowerment.
By donating to NepYork, you help us enhance participation in democracy, improve access to essential resources, and share authentic stories that reflect the vibrant, diverse experiences of Nepali New Yorkers. Together, we can connect, inform, and empower our community. Every contribution ensures these voices are heard and valued.
Donate today to keep Nepali stories alive and thriving in New York!
Kishor Panthi
View More PostsKishor Panthi is the founder and editor-in-chief of Khasokhas and NepYork. He is the author of three books, “Kampan,” "UNTRANSLATABLE" and “Zero Mile.” He writes about social issues, immigration, and politics.
