Last Updated 1 year ago

The original proposal sent shockwaves through international investors, expats, and foreign account holders. A proposed 3.5% excise tax on funds transferred out of the U.S. by non-citizens caught many by surprise.

It sparked real concern, particularly among Israelis with business or investment ties to the U.S. Would every routine wire transfer suddenly come with a hefty surcharge?

Fortunately, the revised version now emerging from the Senate Finance Committee offers significant relief and clarity. While the tax hasn’t been removed completely, the scope has narrowed dramatically. For many, the impact is now minimal or nonexistent.

Key Points

• Business transfers are excluded. Company-to-company wires are not subject to the tax.
• Personal wires from U.S. banks are safe. Wires sent from U.S. bank accounts, debit, or credit cards are exempt.
• Cash-like funding triggers the tax. Money orders, prepaid cards, foreign cards, cash, and crypto incur the 3.5% excise.
• Green-card holders can apply for a refund. If tax is withheld, a refund may be claimed via Form 1040 with a valid SSN.

Why Most Israelis Are Now Exempt

U.S. citizens are already exempt from the remittance tax, but the revised bill now offers broader exemptions even for non-citizens. For many Israeli residents with U.S.-source income, the revised bill removes the sting. As long as you route your funds through a standard U.S. bank account and initiate the transfer from there, no excise tax applies. This should offer major relief to individuals handling rental income, capital gains, or passive investments held in the U.S.

It’s also important to note that business-related transfers are entirely exempt from the rule. The tax only applies to personal, consumer-driven remittances. That means company-to-company transfers, including distributions from U.S. LLCs to Israeli corporate owners, are not subject to the 3.5% excise.

Real-World Examples

Roni’s Wire from Chase

Roni is an Israeli non-US citizen who owns a rental apartment in Miami. She sells the property, and the title company deposits $400,000 into her personal Chase checking account. Roni logs into her online banking, submits a wire transfer to her Israeli bank, and completes the transaction. Because she used U.S. banks that are fully regulated, her wire is exempt from the excise tax.

Yossi’s Remittance via Virtual Currency

Yossi, a green card holder in the U.S., chooses to receive his U.S. property sale proceeds via Bitcoin to his Coinbase account. He feels all hipster and cool, converting his Bitcoin into NIS and transferring it via his virtual currency platform. 

Because virtual currency is considered “cash-like,” the platform must withhold 3.5% under the remittance rule. Yossi can only reclaim the tax by filing a Form 1040 with a valid SSN. This makes the process more complex and impacts his cash flow immediately.

Business Entity Transfer

A Tel Aviv-based company owns a Delaware LLC that invests in U.S. real estate. After selling a property, the LLC wires $250,000 in profits directly to the Israeli corporate parent’s account. 

Since this is not a consumer transfer but rather a business-to-business transaction, the excise tax does not apply. No extra paperwork. No tax withheld.

Updated Rules Snapshot

The latest version of the rule treats transfers differently based on the funding method and sender status:

• If you wire money from a U.S. checking, debit, or credit account in your name, you are fully exempt from the tax.
• If your transfer is funded using cash equivalents such as money orders, prepaid cards, foreign cards, or cryptocurrency, then the 3.5% excise applies. You may be able to get it back if you qualify and file a proper return.
• If your transfer comes from a business entity, it is outside the scope of the remittance rule and tax-free.
• If you are a non-resident alien filing Form 1040-NR and you do not have a valid SSN, then the tax applies and there is no mechanism to claim a refund.

What Comes Next

The Senate Finance Committee draft released on 18 June 2025 holds the excise tax rate at 3.5%. However, several helpful exemptions have been included, particularly for transfers involving U.S. bank rails and business entities.

Looking ahead, the full Senate is expected to begin debate in July. Lawmakers may introduce further changes, such as setting a threshold to exclude small transfers or formalizing additional carve-outs for specific visa holders or remittance types.

We recommend staying alert. Following us if you haven’t yet. The final version of the bill may evolve in small but significant ways, especially for those regularly transferring funds internationally.