No New OPT-Specific Taxes in 2025 Despite Major Tax Law

(US) Reports claim the government plans new taxes on earnings from Optional Practical Training. As of August 8, 2025, there’s no official proposal, rule, or law that creates a new tax targeting OPT income. Here’s what students and employers need to know now.

What’s being discussed and why it matters today

• Who: F‑1 students on OPT, campus advisors, and U.S. employers that hire recent graduates.
• What: Rumors of a new “OPT tax” and questions about the One Big Beautiful Bill Act (OBBBA).
• When: Current status as of August 8, 2025.
• Where: United States federal tax system.
• Why: Students need clear guidance on payroll withholding and filing duties.
• How: Confirming facts against federal law, agency statements, and tax analyses.

Summary of the OBBBA and OPT

The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, reshaped several tax rules for U.S. taxpayers. It made some 2017 tax cuts permanent, raised the SALT cap temporarily, and added limited deductions for certain tip and overtime pay. Crucially:

• The OBBBA did not mention OPT, F‑1 students, or impose new taxes aimed at foreign students.
• No IRS notice, USCIS update, or congressional committee brief has introduced an OPT‑specific tax.

Key takeaway: There is currently no OPT-specific tax in the OBBBA or in any official agency guidance as of August 8, 2025.

Current tax treatment for OPT earnings

• Income tax: OPT wages are generally subject to U.S. federal income tax and possibly state income tax, like other nonresident workers.
• Nonresident filing: Most OPT participants are nonresident aliens for tax purposes initially and file as such unless they later meet residency tests.
• Tax treaties: Some students may benefit from tax treaties between the U.S. and their home countries that reduce or eliminate tax on certain income.
• Social Security and Medicare (FICA): F‑1 students are usually exempt from FICA while they remain nonresident aliens for tax purposes. Once they become resident aliens under tax rules, FICA may apply.

OBBBA headline changes (none target OPT)

The OBBBA’s main items include:
– Lower individual tax rates made permanent.
– Higher estate and gift tax exemption.
– SALT cap increase from $10,000 to $40,000 for 2025–2029.
– Temporary deductions for qualified tip income (up to $25,000) and qualified overtime pay (up to $12,500) for 2025–2028.
– Limited deduction for car loan interest.
– Expanded child tax credit and charitable deduction rules.

None of these provisions create a separate tax line aimed at OPT earnings. Analysis from sources such as VisaVerge.com indicates these changes affect broad taxpayer groups but do not build a distinct tax for foreign students on OPT.

What agencies and experts are saying

• IRS: No new guidance in 2024 or 2025 indicates OPT income faces a new tax category.
• USCIS and DHS: No policy updates create a special tax on OPT wages.
• Congressional committees: No official proposal targets OPT earnings.
• Major tax firms and financial advisors: 2025 summaries do not report added taxes on OPT students.

What this means for students and employers

• Keep regular withholding: Employers should continue to withhold federal income tax based on the employee’s status and forms on file.
• Check FICA status: Employers must verify whether the student is a nonresident alien for tax purposes; if nonresident, FICA usually doesn’t apply to F‑1 OPT wages.
• Confirm state rules: State income tax may apply; each state has its own rules and forms.
• File on time: Students should file the correct federal tax forms each year and retain copies of W‑2s and any 1042‑S forms.

Key forms and official links

• Form I‑765 (Application for Employment Authorization): Used to apply for OPT and obtain an Employment Authorization Document (EAD).
  • USCIS Form I‑765: https://www.uscis.gov/i-765
• IRS nonresident resources: Federal tax guidance and forms for foreign students and scholars.
  • IRS guidance for foreign students and scholars: https://www.irs.gov/individuals/international-taxpayers/foreign-students-and-scholars

Example scenarios

1. Sara — F‑1 graduate on post‑completion OPT:
   • Earns $55,000 in 2025 in California. Employer withholds federal income tax; California state income tax applies.
   • She remains a nonresident alien for tax purposes, so FICA isn’t withheld. She files a federal nonresident return. No extra “OPT tax.”
2. Jin — changes tax residency mid‑year:
   • Becomes a resident alien under the substantial presence test late in 2025. For pay after that date, FICA may apply.
   • This change is due to tax residency, not because of OPT itself.
3. Aditi — treaty benefits:
   • Home country has a tax treaty with the U.S. that exempts some wage income. She submits required forms to claim the treaty benefit and her employer adjusts withholding. No separate OPT tax exists.

Addressing common rumors

• “OBBBA includes a stealth OPT tax.” — False. The law’s text and expert summaries don’t include an OPT‑specific tax.
• “USCIS added a new OPT withholding.” — False. USCIS manages immigration benefits, not tax rates or payroll withholding.
• “New IRS form for OPT wages.” — False. There’s no new form specifically for OPT income in 2025.

What to watch next

• The IRS plans guidance on several OBBBA provisions by October 2025, which will clarify deduction details and timelines for U.S. taxpayers and employers.
• These notices are not expected to create special rules that tax OPT earnings differently from other wages.
• Still, regularly check IRS updates and any new treaty explanations.

Practical steps for students

• Keep your I‑20, EAD, job offer letter, and pay stubs organized.
• Ask payroll whether they’re treating you as a nonresident or resident for tax purposes — tax residency differs from immigration status.
• Review treaty eligibility with a tax professional; one small form can save significant tax.
• File returns on time, even if you owe no tax. Late filings can cause problems with refunds and future benefits.
• If your FICA status changes mid‑year, confirm payroll adjusts correctly from that pay period forward.

Practical steps for employers

• Verify immigration and tax status separately — do not conflate the rules.
• Use payroll system’s nonresident settings when appropriate.
• Request the correct forms to apply any tax treaty benefits the student claims.
• Monitor IRS guidance tied to the OBBBA, but do not expect an “OPT tax” notice.

Wider community impact

International students fill key talent gaps in engineering, health care, and data fields. Stable tax rules help them plan jobs and training, while sudden changes could disrupt hiring and cause payroll errors. The current clarity—that there is no special OPT tax—helps students and employers focus on real compliance tasks.

Bottom line

• As of August 8, 2025, there is no law, proposal, or rule that creates a new tax targeting OPT earnings.
• Students on OPT should follow standard income tax rules, file as nonresident when applicable, and follow normal FICA treatment based on tax residency.
• The OBBBA does not change this. Keep records, follow payroll steps, and monitor official updates — but do not expect an OPT‑specific tax in current guidance.