OPT Fair Tax Act Ends Payroll Tax Exemption for F-1 Student Workers, Increasing Costs for Trainees

The OPT Fair Tax Act is short, but it packs a punch, particularly for the thousands of international students on F-1 visas who are trying to get real-world work experience in the U.S. through Optional Practical Training (OPT). Simply put, this bill changes the tax rules so that work done during OPT will now be subject to Social Security and Medicare taxes.

The Fine Print on Payroll Taxes

Currently, F-1 visa holders performing services under OPT often benefit from an exception to the Federal Insurance Contribution Act (FICA), which covers Social Security and Medicare taxes. This means they don't pay the roughly 7.65% payroll tax that most U.S. workers (and their employers) pay. Section 2 of this new Act specifically carves out an exception to that existing exception. The result? Work performed by an F-1 student on OPT will now be treated like standard employment for federal tax purposes, meaning those earnings will be subject to FICA taxes starting the first calendar month after the bill becomes law.

What This Means for F-1 Trainees

If you're an F-1 student using OPT to work in a U.S. company—maybe you're a recent grad coding software or working in a lab—this means your take-home pay is about to shrink. For someone earning a modest $50,000 annually, this change translates to roughly $3,825 in new mandatory payroll taxes deducted directly from their paycheck each year. This is a significant new financial burden on a population that is often in entry-level, temporary training roles and already managing high costs of living and tuition.

While this change will funnel more money into the Social Security and Medicare trust funds, achieving a form of tax parity with domestic workers, it also removes a key financial benefit that helped make OPT employment viable for international students. For these trainees, who are here specifically to gain experience before returning home, the immediate impact is a mandatory pay cut enforced by the federal government, applying to every calendar month they work under OPT moving forward.