US Remittance Tax for Canadians: What the 1% Rule Actually Hits

Since January 1, 2026, a new 1% federal excise tax has applied to certain money transfers leaving the United States. Nine months in, the US remittance tax for Canadians is still one of the most misunderstood provisions of the 2025 tax act — mostly because the rule is far narrower than the headlines suggested. It turns on one thing: how you hand the money over.

The provision is section 4475 of the Internal Revenue Code, added by section 70604 of Public Law 119-21, enacted July 4, 2025. It imposes a 1% tax on certain remittance transfers occurring after December 31, 2025. For a household that regularly moves funds from a US account to a Canadian one — a snowbird settling US bills, a dual citizen funding a Canadian mortgage, a retiree drawing on an IRA to spend in Canada — the practical question is simple: does this cost you 1%? For most of them, the answer is no. Understanding why is what protects you from paying it by accident.

What is the US remittance tax, and how does it work?

The mechanics are short, and worth reading literally.

• The rate. 1% of the amount of the remittance transfer. There is no graduated scale.
• Who pays. Section 4475(b) provides that the tax is paid by the sender. The remittance transfer provider collects it and remits it to Treasury quarterly. If the provider fails to collect it at the time of the transfer, the provider becomes liable for it.
• The trigger. Section 4475(c) is the whole ballgame: the tax applies only to remittance transfers for which the sender provides cash, a money order, a cashier’s check, or any other similar physical instrument to the provider.
• The definitions. Section 4475(e)(1) borrows “remittance transfer,” “remittance transfer provider,” and “sender” from section 919(g) of the Electronic Fund Transfer Act — consumer-transfer language, not general banking language.
• The plumbing. Providers report the tax on Form 720, Quarterly Federal Excise Tax Return, as IRS No. 155, with semimonthly deposits. The first deposit was due January 29, 2026.

That fourth and fifth point matter more than they look. This is an excise tax administered through the businesses that send money, not a line on your Form 1040. You will generally never file anything for it. You will simply be charged it — or not — at the counter.

The core idea: The US remittance tax for Canadians is a tax on how you fund a transfer, not on how much you move or where it lands. Cash and physical instruments are in scope. Money debited from an account is not.

Does the 1% apply to a wire from your US bank to your Canadian bank?

On the face of the statute, no. A transfer funded by debiting a bank account is not a transfer for which the sender “provides cash, a money order, a cashier’s check, or any other similar physical instrument.” That is the language Treasury and the IRS have repeated in their own plain-English summary of the provision, and it is the distinction the proposed regulations issued under the section are built around.

So the everyday cross-border money movements most of our clients make — a wire from a US chequing account, an ACH pull, a transfer between linked Canadian and US accounts at the same banking group, a currency broker debiting an account before converting — sit outside the charge as drafted. What is squarely in scope is walking into a storefront money-services business with banknotes, or buying a money order or cashier’s cheque and handing it to a remittance provider.

Two cautions, because this is new law. First, the proposed rules (REG-114499-25) are still working through the mechanics of imposition and calculation, so the edges are not yet settled. Second, the tax attaches to the funding method the provider records, not to what you intended — if you fund an otherwise-electronic transfer with a cashier’s cheque, the character changes. Ask the provider how the transfer is being funded and coded, in writing, before sending anything large.

What happened at the end of the third quarter of 2026?

There is a timing wrinkle worth knowing, even though it applies to providers rather than to you. In Notice 2025-55, issued October 7, 2025, Treasury and the IRS granted transition relief from the section 6656 failure-to-deposit penalty for the first three calendar quarters of 2026. A provider that made timely deposits — even miscalculated ones — and paid any shortfall by the Form 720 due date for the quarter was deemed to have met the reasonable-cause standard.

That relief was designed to cover the learning period. The third quarter closes September 30, 2026, and the Form 720 covering July through September is due October 31, 2026. From the fourth quarter onward, providers are operating without that cushion. The predictable consequence for consumers is tighter, more literal application at the point of sale: clearer questions about funding method, and less willingness to treat a borderline transaction as out of scope.

What does the Canadian side do with money arriving from the US?

Nothing taxable happens simply because money crosses the border. Canadian tax follows income and gains, not transfers — moving your own after-tax capital from a US account to a Canadian account is not itself a taxable event. Reporting is a different matter:

• International EFT reporting. Canadian banks, credit unions, money services businesses and casinos must report international electronic funds transfers of C$10,000 or more to FINTRAC and the Canada Revenue Agency, generally within five working days. Two or more transfers under the threshold made within 24 consecutive hours by or on behalf of the same person are aggregated and treated as one.
• Carrying it instead. Currency or monetary instruments totalling C$10,000 or more must be declared to the Canada Border Services Agency on entry or exit. Failure to report can lead to penalties or forfeiture of the funds.
• What still needs reporting on your returns. The transfer is invisible; the assets may not be. A US person keeps FBAR and Form 8938 obligations, and a Canadian resident holding more than C$100,000 of specified foreign property generally files Form T1135.
• The exchange rate is the real cost. A 1% excise tax is a talking point. A 2% spread on the conversion, paid twice a year for twenty years, is the number that actually shapes a cross-border retirement.

What this means for cross-border clients

For most cross-border households, the honest headline is that this tax is a non-event — provided you keep moving money the way you already do. The planning work is in not stumbling into it:

• Move money electronically, from account to account. Every transfer funded by an account debit is outside the charge as the section is drafted.
• Treat cash, money orders and cashier’s cheques as the exception, not the default — and when one is unavoidable, price the extra 1% into the decision.
• Ask any currency broker or money-services business directly whether they are collecting the section 4475 tax on your transaction, and on what basis. Their answer tells you how they have coded the transfer.
• Do not break transfers into smaller pieces to stay under a reporting threshold. Canadian aggregation rules capture same-day splitting, and structuring is a far worse problem than reporting.
• Focus the effort where the money actually is: conversion spreads, the timing of large conversions, and which currency your near-term spending sits in. Those decisions dwarf a 1% charge you can usually avoid entirely.

If your plan involves recurring six-figure movements between countries — funding a Canadian purchase from a US portfolio, repatriating proceeds after a US property sale, or settling an estate on one side and distributing on the other — the transfer mechanics deserve a deliberate decision rather than a default.

Frequently asked questions

Does the US remittance tax apply to a wire transfer from a US bank to a Canadian bank?

Generally no. Under section 4475(c), the 1% tax applies only to remittance transfers for which the sender provides cash, a money order, a cashier’s cheque, or another similar physical instrument to the remittance transfer provider. A transfer funded by debiting a bank account falls outside that description. Because the statute is new and proposed regulations are still working through the details, confirm the funding method with the provider rather than assuming it.

How much is the US remittance tax, and who pays it?

One percent of the amount of the transfer. Section 4475(b) provides that the tax is paid by the sender and collected by the remittance transfer provider, which remits it to Treasury quarterly. If the provider does not collect the tax at the time of the transfer, the provider is liable for it.

When did the 1% remittance transfer tax take effect?

Section 4475 was added by section 70604 of Public Law 119-21, enacted July 4, 2025, and applies to certain remittance transfers occurring after December 31, 2025. Providers began semimonthly deposits in 2026, with the first due January 29, 2026, and report on Form 720 as IRS No. 155.

Do Canadians pay tax in Canada on money transferred from the United States?

Moving your own money across the border is not itself a taxable event in Canada — tax follows the income or gain, not the transfer. Reporting does apply: Canadian financial institutions and money services businesses must report international electronic funds transfers of C$10,000 or more to FINTRAC and the Canada Revenue Agency, and two or more smaller transfers within 24 consecutive hours that total C$10,000 or more are treated as a single transaction.

Is carrying cash across the border a way to avoid the remittance tax?

It is not a sensible plan. Currency or monetary instruments of C$10,000 or more must be declared to the Canada Border Services Agency when entering or leaving Canada, and failure to report can result in penalties or forfeiture. Cash is also precisely the funding method the 1% tax was written to capture whenever a remittance provider is involved.

Moving real money between two countries?

We structure cross-border cash movement, currency conversion and reporting as one plan across both tax systems — as one of the only firms registered as a Portfolio Manager in Canada and an RIA in the United States.

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Related reading: our cross-border tax planning service, the USD to CAD exchange rate explainer, currency exchange tips for snowbirds, and T1135 foreign reporting.

Sources

• Notice 2025-55, Relief from Penalty for Failure to Deposit Remittance Excise Tax — Internal Revenue Service, October 7, 2025 — irs.gov
• IR-2025-102, Treasury, IRS provide penalty relief for remittance transfer providers — Internal Revenue Service, October 7, 2025 — irs.gov
• Instructions for Form 720 (Rev. June 2026) — excise tax on remittance transfers, IRS No. 155 — irs.gov
• REG-114499-25, Excise Tax on Remittance Transfers (proposed rules) — Internal Revenue Bulletin 2026-18 — irs.gov
• Form 720, Quarterly Federal Excise Tax Return — irs.gov
• Electronic Funds Transfer Reporting — Canada Revenue Agency — canada.ca
• Reporting electronic funds transfers to FINTRAC — FINTRAC — fintrac-canafe.canada.ca
• Travelling with CAN$10,000 or more? Declare it — Canada Border Services Agency — cbsa-asfc.gc.ca
• T1135 Foreign Income Verification Statement — Canada Revenue Agency — canada.ca
• Details on reporting foreign bank and financial accounts (FBAR) — Internal Revenue Service — irs.gov

© 2026 Lucas Wennersten · 49th Parallel Wealth Management, LLC · From the Desert to the Tundra™. For educational purposes only. Not financial, tax, or legal advice. Section 4475 is newly enacted and the proposed regulations are not final; rules and thresholds referenced were current at the date of writing and change frequently. Past performance is not indicative of future results. Verify all figures against the linked primary sources before publishing.