OPT Fair Tax Act Would End FICA Exemption for OPT Workers

(UNITED STATES) A new tax proposal in the U.S. Senate, called the OPT Fair Tax Act (S. 2940), would change how international students on Optional Practical Training (OPT) are taxed and how much employers pay when they hire them. If this bill becomes law, students on OPT and their employers would have to pay full FICA taxes (Social Security and Medicare), just like U.S. workers.

Right now, most F-1 students working under Optional Practical Training (OPT) don’t pay these payroll taxes, and neither do their employers. That tax break makes a real difference in take‑home pay, especially in expensive cities and for students with loans. According to analysis by VisaVerge.com, the proposal would not only reduce net income for OPT workers but could also make some U.S. employers think twice before hiring them.

How OPT and FICA Taxes Work Today

Under current U.S. tax rules, most F‑1 students on OPT are exempt from FICA taxes. FICA stands for Federal Insurance Contributions Act, which funds Social Security and Medicare.

For regular workers, these taxes are:

• 6.2% of wages for Social Security
• 1.45% of wages for Medicare

So the total employee share is 7.65%, and the employer matches that 7.65%, for a combined 15.3% on wages.

Because of the FICA exemption, many OPT workers only pay regular federal and state income taxes, not these payroll taxes. Their employers also save 7.65% per OPT employee, which quietly makes hiring international graduates cheaper than hiring U.S. workers at the same salary.

The OPT Fair Tax Act would remove this special treatment and treat OPT wages like ordinary U.S. wages for payroll tax purposes.

What the OPT Fair Tax Act Would Change in Practice

If the bill passes as written, two big changes would hit at the same time:

• OPT students would start paying 7.65% FICA taxes on their wages.
• U.S. employers would also pay 7.65% FICA on those same wages.

That means:

• A direct 7.65% cut in take‑home pay for students on OPT, on top of normal income taxes.
• An extra 7.65% cost for employers every time they hire someone on OPT.

Example impacts from the bill’s analysis:

For many international students, that lost income is the difference between saving money, paying off loans, or just managing rent and groceries.

Step 1: Check Whether You Could Be Affected

First, work out if the OPT Fair Tax Act would apply to you if it becomes law. Ask yourself:

• Are you currently on F‑1 status and working under Optional Practical Training (OPT) or planning to apply soon?
• Are you in a STEM OPT extension or planning to use the 24‑month STEM extension?
• Are you still outside the 🇺🇸 United States but planning a degree that you hope will lead to OPT?

If you answer “yes” to any of these, this bill matters directly for you, your family, and sometimes your sponsor or lender. It doesn’t matter which country you’re from — the bill would affect all international students on OPT, including those from India, China, Nigeria, Brazil, Europe, the Middle East, and beyond.

If you are not on F‑1 status or are already working on H‑1B or as a permanent resident, the OPT Fair Tax Act itself would not change your payroll taxes, though it may affect hiring patterns for new graduates.

Step 2: Estimate the Impact on Your Take‑Home Pay

Once you know you may be covered, the next step is to run the numbers to see how your monthly budget could change.

Steps to estimate:

1. Take your annual salary offer or expected salary.
2. Multiply by 7.65%.
3. That number is roughly how much less you’d take home in a year if the bill becomes law.

Quick examples:

• Salary $40,000 → FICA about $3,060 per year
• Salary $50,000 → FICA about $3,825 per year
• Salary $60,000 → FICA about $4,590 per year

Then divide that annual figure by 12 to see how much your monthly pay would drop.

Common monthly impacts for students in high‑rent cities (NYC, San Francisco, Boston):

• Ability to pay rent and utilities
• Money sent home to family
• Student loan payments
• Savings for future visa steps or emergencies

This is why many families and NRI parents are re‑checking financial plans for children studying in the United States.

Step 3: Adjust Your Budget and Study Plans

Even though the bill is not yet law, it is wise to plan as if FICA taxes could apply during your OPT period, especially if your OPT will run into 2026 and beyond.

Key actions for students and families:

• Re‑check your cost-of-living plans.
  Review rent, transport, health insurance, food, and other basics. Add a 7.65% “buffer” to your tax assumptions.

• Revisit loan and repayment timelines.
  If you or your parents took education loans, ask whether repayments remain affordable if net salary is 7.65% lower.

• Look at cheaper cities or remote work options.
  Consider jobs in lower‑cost states or roles that allow remote work from more affordable locations.

• Build a small emergency fund.
  Even a few hundred dollars set aside can help if your first paychecks are smaller than expected.

Parents and families, especially NRIs planning education for several children, may also compare the U.S. with other countries where post‑study work and tax policies are more predictable.

Step 4: Talk to Employers About Their Side of FICA

The bill also raises the employer cost of hiring OPT workers. For example, on a $50,000 salary, an employer’s extra cost of $3,825 per hire adds up when a firm hires many international graduates.

What to expect in hiring and negotiations:

• Some employers might lower salary offers to offset the extra 7.65% FICA cost.
• Others might hire fewer OPT workers or favor candidates who already have work authorization without added payroll complexity.
• A few employers may decide it is still worth paying more, especially in high‑skill or STEM roles.

Suggested questions to ask employers:

• “Does your company regularly hire students on Optional Practical Training (OPT)?”
• “Are there any internal changes expected if OPT workers must pay FICA taxes?”
• “Does the company still support H‑1B sponsorship after OPT?”

These questions give clues about how stable your career path might be with that employer in a changing tax and visa climate.

Step 5: Connect Tax Changes to Your Immigration Strategy

For many students, the path remains study → OPT → H‑1B (or other work visa) → green card. The proposed FICA change does not directly alter visa rules, but it makes that path more expensive.

Practical steps for long‑term planning:

• Use OPT time wisely.
  Treat your OPT year (or STEM extension) as a focused window to gain skills and secure employers who can sponsor you.

• Consider alternative pathways early.
  Look at employer‑sponsored visas, options in other countries, or remote roles with U.S. companies while living elsewhere.

• Discuss timelines with your employer.
  If an employer is willing to sponsor you for H‑1B, they may also be willing to absorb additional payroll costs.

If you are still in school or starting an F‑1 program, weigh the overall return on investment (ROI) of a U.S. degree: compare higher tuition and taxes against future salary, career growth, and chances of long‑term status.

Step 6: Track the Bill’s Progress Through the Senate

The OPT Fair Tax Act is not law yet. It was introduced by Senator Tom Cotton on September 30, 2025, and sent to the Senate Committee on Finance. As of now, there are no listed co‑sponsors and no further official actions recorded.

What can happen next:

• The bill may be discussed, amended, or held in committee.
• It could move to the full Senate, then the House of Representatives.
• It could also stall and never become law.

To stay informed without panicking:

• Watch official updates on U.S. Congress tracking sites.
• Follow trusted immigration news sources and tax professionals.
• Check updates from your university’s international student office.

This proposal fits into a broader pattern where some U.S. lawmakers aim to “prioritize American workers” and reduce perceived special tax incentives for hiring foreign students.

Step 7: Prepare for Tax Filing Seasons During OPT

If the bill passes and becomes effective during your OPT period, your payroll and tax filing experience would change:

• Your employer would start withholding FICA taxes from each paycheck.
• Your pay stub would show Social Security and Medicare deductions.
• Your annual tax filing would include these payroll taxes in your records.

If it does not become law while you are on OPT, your situation may stay the same as now, with no FICA taxes due in most cases. Either way, when you approach graduation and OPT, it helps to understand both the immigration side and the tax side.

For the immigration step, you normally apply for OPT by filing Form I-765 (Application for Employment Authorization) with U.S. Citizenship and Immigration Services. Full details and instructions are on the official USCIS page for Form I-765. That form controls whether you can work; the OPT Fair Tax Act would control how your wages are taxed once you start working.

Key takeaway: Check whether you’re affected, run realistic salary estimates, adjust budgets, discuss options with employers, and track the bill’s progress so this proposal becomes a factor in your planning—not a surprise that derails it.

How This Fits Into the Bigger Picture for Global Students

Historically, many followed this path:

1. Arrive as an F‑1 student.
2. Finish your degree and use Optional Practical Training (OPT) to get U.S. work experience.
3. Move, if lucky, to an H‑1B or other work visa, and eventually a green card.

The FICA tax exemption was one of the quiet benefits of that route, giving students slightly more take‑home pay and employers a small hiring discount. The OPT Fair Tax Act would remove that hidden advantage.

Implications for international students, NRIs, and global aspirants:

• The U.S. “study → work” path is now more about costs and tighter margins, not just visas.
• Families must consider long‑term financial planning, not only university prestige.
• Competing study destinations may become more attractive if they offer simpler or cheaper post‑study work options.

At the same time, many students will still choose the United States for its job market, research opportunities, and global recognition of U.S. degrees. The challenge is to enter with clear eyes and accurate numbers, especially around taxes and future income.

By checking whether you might be affected, running realistic salary estimates, adjusting budgets, talking openly with employers, and tracking this bill’s progress, you can treat the OPT Fair Tax Act as one more factor in your plan—not as a shock that derails it at the last minute.