The United States is considering tightening rules around the F-1 visa Optional Practical Training (OPT) program by introducing a special tax on students working under this visa and ending their current tax exemptions.
Arkansas Senator Tom Cotton has introduced the ‘OPT Fair Tax Act’ in the US Congress. If passed, the bill would end FICA (Federal Insurance Contributions Act) tax exemptions for F-1 OPT and STEM OPT workers.
The FICA tax is a payroll tax that funds Social Security and Medicare. Normally, both employers and employees pay 6.2% towards Social Security and 1.45% towards Medicare.
Under current law, companies hiring OPT students don’t pay this tax, and neither do the students, as per IRC 3121(b)(19) and IRS 26 CFR § 31.3121(b)(19)-1, which exempt temporary non-immigrant workers.
If the new bill becomes law, OPT students will have to pay 7.65% of their salary towards Social Security and Medicare. Senator Cotton said this move is aimed at encouraging companies to hire American workers instead of foreign students.
“Our tax code shouldn’t incentivize businesses to hire foreign workers. By ending the FICA tax exemption, we will put American workers first,” Cotton stated.
However, the move has drawn criticism because foreign students on OPT are not entitled to Social Security or Medicare benefits, even if they pay the tax.
“We would lose 7.65% of our hard-earned money for benefits we can’t even use. This is not just about hiring Americans — they want us to pay for services we’ll never get,” said a student reacting to the proposal.
If passed, the OPT Fair Tax Act could have a major financial impact on thousands of Indian students in the US.