OPT Fair Tax Act: US Senate Proposal Seeks To End Tax Breaks For International Students Working Under OPT

United States Senate bill introduced recently could potentially change how international students hired under the country's Optional Practical Training (OPT) program are taxed, making it perhaps lower their after-tax income and costing companies more to hire them

Introduced by Senator Tom Cotton in September 2025, the OPT Fair Tax Act (S. 2940) seeks to end payroll tax exemptions currently benefited by students on F-1 visas who are employed under the OPT programme. The Bill has been referred to the Senate Committee on Finance for review.

If passed, this would mean that students on OPT would have to pay payroll taxes, commonly known as FICA taxes, which fund the US Social Security and Medicare systems. Employers would also need to contribute their share, as is the case with American citizens and permanent residents.

What the law says now?

Currently, F-1 visa students working under the OPT program are not required to pay FICA taxes in their initial five years in the US.

As stipulated by the Internal Revenue Service (IRS), non-resident aliens in F-1 status are not obligated to make Social Security and Medicare contributions provided that they are participating in authorized activities such as OPT.

The FICA tax rate is 15.3% of wages, split evenly between the employer and employee (7.65% each). This includes 6.2% for Social Security and 1.45% for Medicare.

What will change if the Bill passes

If the OPT Fair Tax Act becomes law, these exemptions will be removed. Both students and employers would need to pay their share of FICA taxes, adding a new financial burden for both sides.

The payroll tax exemption was originally designed to support foreign students, who are considered temporary residents and may not benefit from long-term social welfare programmes like Social Security or Medicare.

For years, this has made the OPT programme financially attractive for both students and employers.

OPT is a popular work authorisation programme run by the US Citizenship and Immigration Services (USCIS). It allows international students to gain practical experience in their field of study for up to 12 months after graduation, or up to 36 months for students in STEM (science, technology, engineering, and mathematics) disciplines.

The OPT Fair Tax Act is presently in its infancy and has to go through committee debate and both houses of Congress before it can become law.

In the meantime, the current FICA exemptions continue to apply. But if the proposal passes, it would be one of the largest changes to US taxes for foreign students in many years, one that would redefine the financial and professional outlook for thousands of recent graduates who view America as the land of opportunity.

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