By Nij Martin
This is the first time such a tax is being introduced, and while 1% is still a new cost, it’s a big relief compared to what was originally planned (5%). And the tax applies only to cash, money orders, and cashier’s checks – bank transfers exempt
For millions of migrants living and working in the United States—including Nigerians—sending money back home is a vital lifeline. But starting January 1, 2026, those remittances could get slightly more expensive, thanks to a new federal tax signed into law by former President Donald Trump.
For countless Nigerian families, remittances from the U.S. serve as a financial lifeline—funding education, healthcare, and daily necessities. While the originally proposed 5% tax would have severely strained this crucial support system, reducing it to 1% demonstrates a recognition of remittances’ vital role in sustaining households across Nigeria. This compromise, though still an added burden, reflects a more balanced approach to taxation without completely undermining families who rely on these cross-border transfers.
What You Need to Know
The Trump administration’s “One Big Beautiful Bill Act” (OBBBA) includes a 1% tax on certain international money transfers, set to take effect on January 1, 2026. The tax, initially proposed at 5%, was reduced after fierce opposition from fintech companies and migrant advocacy groups.
Key Details of the Remittance Tax
- Applies to: Cash transfers, money orders, or cashier’s checks sent abroad.
- Exemptions: Bank account transfers, debit/credit card payments, and senders who can prove U.S. citizenship.
- Minimum Threshold: Only transfers over $15 are taxed.
- Effective Date: January 1, 2026.
Why Was the Tax Reduced?
Originally pitched as a 5% levy, the proposal faced backlash from financial service providers and lawmakers. Industry groups argued it would hurt migrant workers and small businesses while pushing transactions into unregulated channels.
“If it has to exist… this is the least worst version of all the other proposals,” said Scott Talbott, a spokesperson for the Electronic Transactions Association, which represents companies like PayPal and Wise.
Who’s Affected?
- Migrant workers sending money to families abroad.
- Fintech firms like Remitly and Wise, competing with traditional players like Western Union and MoneyGram.
- Developing nations reliant on remittances (e.g., Nigeria, India, Mexico).
Industry Pushback
Fintech companies warned that higher taxes could drive users toward informal (and riskier) transfer methods.
The American Fintech Council stated in a letter: “This tax would harm small businesses and everyday consumers while empowering bad actors and undermining anti-money laundering efforts.”
What’s Next?
While the 1% rate is lower than feared, critics argue it still adds to the financial burden of migrants. Some analysts predict a decline in formal remittance flows, while others believe digital transfers (which are exempt) will rise.
For those sending money home, consider switching to bank transfers or card-based services to avoid the tax entirely.