US to Mexico Remittances: The 2025 Drop, the 1% Tax and What It Costs
Remittances to Mexico fell 4.6% in 2025 to $61.7 billion, the first drop in a decade. How the new 1% US tax on cash transfers works and what senders pay.
Key takeaways
- Remittances to Mexico fell about 4.6% to $61.7 billion in 2025, the first annual decline after 11 years of growth.
- Since 1 January 2026, a 1% US excise tax applies to transfers funded with cash, money orders or cashier's checks, while bank account and card-funded transfers are exempt.
- Sending $200 from the US to Mexico cost 3.86% on average in Q3 2025, and the FX margin often matters more than the fee or the new tax.
For eleven straight years, the money Mexicans in the United States sent home grew. In 2025 that streak ended. A construction worker in Houston who used to wire $400 every two weeks to his parents in Michoacan may now send less often, or hold back savings in case he needs them himself. Add a new federal tax on cash-funded transfers from January 2026, and the busiest remittance corridor in the world is going through an unusual period.
A first decline in more than a decade
Banco de Mexico data showed remittances of $61.72 billion in 2025, down from $64.75 billion in 2024. Reporting by Zeta Tijuana described the roughly 4.6% fall as the largest in 16 years and the first after 11 years of growth. The number of transactions dropped faster, by 5.48% to 155.74 million, while the average transfer edged up to a record $397.
That combination, fewer but larger transfers, fits what economists cited: a softer US labour market for migrant-heavy sectors, and fear of immigration enforcement making some people less willing to visit a remittance agent or keep regular patterns. Analysts at Banco Base and BBVA Research both pointed to US labour conditions as the main swing factor for 2026.
It helps to keep the drop in proportion. Even after the fall, Mexico received more than $61 billion, and remittances remain one of the country's largest sources of foreign currency. The decline is real, but it comes from a very high base.
The picture in 2026 has been mixed. June brought $5.47 billion, a 4.2% rise from a year earlier, but monthly figures have moved up and down. For January to August 2026, inflows totalled $41.8 billion, up 2.2% on a year earlier, while the number of transfers fell 2.2% and the average transfer rose to $409, according to Banxico data reported by Por Esto. Nobody is calling a return to the old growth rate.
The new 1% remittance tax, explained
From 1 January 2026, a 1% federal excise tax applies to remittance transfers from the United States that are funded with cash, money orders, cashier's checks or similar physical instruments, under a new section 4475 of the tax code. The tax is imposed on the sender, but remittance providers collect it at the point of sale and remain liable if they fail to, according to Cherry Bekaert. Early drafts of the legislation proposed a much higher rate, which was cut to 1% before passage.
Who does not pay? Treasury's proposed regulations, published in April 2026, confirm that transfers funded from a US bank account, or by a US-issued debit or credit card, are outside the tax, according to Greenback Tax Services. In practice:
- $500 in cash handed over at an agent counter: $5 of tax.
- $500 sent through an app funded from a checking account: no tax.
- $500 paid with a debit card at the same agent: no tax.
The IRS has given providers penalty relief for the first three quarters of 2026 while systems catch up, provided they make timely deposits.
The tax is small, but it lands precisely on the people least able to avoid it: those who still pay in cash.
Source World Bank Remittance Prices Worldwide, Q3 2025 (Sub-Saharan Africa: Q1 2025).
Who actually pays it
Banxico already classifies more than 99% of remittances to Mexico as electronic transfers, but that describes how the money travels, not how the sender funds it. Many senders still walk into a store with cash, especially those without a bank account or those wary of sharing documents. For them, the tax is a direct cost. For banked senders, it is a nudge to switch funding method.
Two side effects are worth watching. Some senders may move to card or account funding, which is the policy's apparent intent. Others may move to informal channels, which would make the flows harder to measure and less safe for families.
What it costs to send money to Mexico
Mexico is one of the cheapest major corridors. The World Bank's first-quarter 2025 report named it the least expensive G20 receiving market, at 4.98% on average for $200. Corridor data for the third quarter of 2025 shows sending $200 from the US cost an average of 3.86%, made up of a fee of about $5.22 and an exchange rate margin of 1.25%, according to World Bank Remittance Prices Worldwide. The cheapest offers in the sample, card-funded online transfers, came close to zero or even below the reference rate.
| Funding method for $200 | Typical provider cost | New excise tax |
|---|---|---|
| Cash at an agent | Fee plus FX margin | $2.00 |
| US debit or credit card | Fee plus FX margin | None |
| US bank account via app | Fee plus FX margin | None |
The excise is visible; the exchange rate margin often is not. A 2% margin on $400 is $8, which can dwarf both the fee and the tax. Our guide to the mid-market rate shows how to check it.
Where the money goes in Mexico
Remittances in Mexico pay for food, rent, school costs, medical bills and household utilities. A rising average transfer alongside falling transaction counts suggests families are bundling needs into fewer, larger payments. That is exactly the behaviour that direct bill payment from abroad could serve, a theme we explore in paying utility bills across borders.
What to watch for the rest of 2026
- US construction and hospitality hiring, the clearest leading indicators for flows.
- Final Treasury rules on the excise, especially how providers report and how mixed-funding transfers are handled.
- Peso strength. A stronger peso means each dollar buys less at home, which can push senders to send more dollars, or to stretch the same amount further.
- Channel shifts from cash to accounts and cards, which Banxico data alone will not show.
The corridor is not shrinking dramatically. But for the first time in years, it is not simply growing, and that changes the conversation for everyone in it.
This article is general information, not tax advice. Rules on the remittance excise were still being finalised at the time of writing.
Frequently asked questions
Is there a tax on sending money to Mexico from the US?
Since 1 January 2026, a 1% federal excise tax applies to remittances funded with cash, money orders, cashier's checks or similar physical instruments. Transfers funded from a US bank account or a US-issued debit or credit card are exempt.
How much money was sent to Mexico in 2025?
Banco de Mexico data showed $61.72 billion in 2025, down from $64.75 billion in 2024, the first decline in more than a decade.
What is the average cost of sending money to Mexico?
World Bank data for Q3 2025 shows an average total cost of 3.86% for a $200 transfer from the US, including a fee of about $5.22 and a 1.25% exchange rate margin.
Sources and further reading
- Zeta Tijuana: Remesas familiares caen 4.56% en 2025 (Banxico data)
- Por Esto: Remesas a Mexico crecen 2.2% en 2026 (Banxico data)
- Cherry Bekaert: Excise tax on remittance transfers, IRC section 4475 explained
- Greenback Tax Services: IRS proposed regulations on the 1% remittance tax
- World Bank RPW: United States to Mexico corridor
- World Bank RPW main report, Q1 2025
This article is for general information and is not financial, legal or tax advice. Figures are as reported by the sources above at the time of writing.
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