OPT and STEM OPT taxes: FICA, residency and the sixth-year switch
OPT taxes explained: you owe income tax on OPT pay, but no Social Security or Medicare tax while you are a nonresident. Here is when that changes.
Published
- visa holders
- OPT
- STEM OPT
- F-1 students
- FICA
- tax residency
Watch in 3 minutes
On OPT and STEM OPT, you pay federal and state income tax on your wages like any other worker. While you are a nonresident alien, you pay no Social Security or Medicare tax, which saves 7.65% of your pay.
That changes after your fifth calendar year as a student. From the sixth, your days in the US count, and you usually become a resident alien. Social Security and Medicare then come out of your pay, even on the same F-1.
| Federal income tax | Yes, at 10% to 37% |
|---|---|
| State income tax | Yes, if your state has one |
| Social Security and Medicare | None while a nonresident |
| Standard deduction ($16,100) | Once a resident, or if from India |
| Days that do not count | Your first 5 calendar years as a student |
| OPT length | 12 months, plus 24 for STEM |
| Return while a nonresident | Form 1040-NR and Form 8843 |
| Return once a resident | Form 1040 |
| Rules checked | October 27, 2026 |
How much tax do you pay on OPT?
You pay federal income tax on your whole salary at the graduated rates, plus any state income tax. As a nonresident you get no standard deduction but pay no Social Security or Medicare tax.
Take a single worker earning $80,000 in 2026. The table shows the federal tax in three cases, before state tax and itemized deductions.
| Case | Income tax | Payroll tax |
|---|---|---|
| Nonresident on OPT | $12,312 | $0 |
| Nonresident from India | $8,770 | $0 |
| Resident alien | $8,770 | $6,120 |
There is no flat OPT or STEM OPT tax percentage. In this example, federal income tax takes about 15% of the nonresident's pay. A resident, including one on H-1B, pays $14,890 in all, $2,578 more. A student from India can usually take the standard deduction under Article 21(2) of the US-India tax treaty.
Are OPT students exempt from paying taxes?
No. OPT students are exempt from Social Security and Medicare tax, not from income tax, and only while they are nonresident aliens.
The IRS calls F-1 students "exempt individuals", but the term means their days do not count toward the substantial presence test. It does not mean their income is tax-free. The payroll tax exemption covers practical training, including OPT and STEM OPT, because that work carries out the purpose of the F-1 visa.
When do you become a resident on OPT?
Most OPT workers become resident aliens in their sixth calendar year as a student. Five rules decide it.
- Calendar years, not years since arrival. Any part of a year counts as a whole year. An August arrival uses up the first year in five months.
- Earlier student years count too. The limit is 5 calendar years as an exempt student, teacher or trainee in total. A US bachelor's degree before your master's uses up years.
- From January 1 of year six, your days count. Your earlier student days stay excluded, so you need 183 days in that year itself. Working here all year, you reach it in early July.
- Payroll tax starts once you are a resident. Your employer should withhold Social Security and Medicare even though your visa is still F-1.
- Your return changes. You file Form 1040, take the standard deduction, and report your worldwide income.
Here is where the count catches people. Say you arrived in August 2021 for a master's degree. Your exempt years were 2021 to 2025, so your days began to count on January 1, 2026. That is about four years and five months after you landed, not five years.
As a resident, you also file an FBAR for accounts back home if they total more than $10,000 at any time in the year. You can stay exempt past five years only by showing that you do not intend to live in the US permanently.
What are the differences between H-1B taxes and OPT taxes?
The income tax rates are the same. The differences are payroll tax and how your days count.
- Payroll tax. H-1B wages bear Social Security and Medicare from the first day of H-1B status. On OPT, they start only once you are a resident.
- Your days. Every H-1B day counts toward the substantial presence test. OPT days do not count during your five exempt years.
- The switch year. If your H-1B starts on October 1, only those 92 days count. You are usually a nonresident for that year, unless you choose to be treated as a resident from October 1.
- Other work visas. An O-1 employee is taxed like an H-1B worker, with payroll tax from the first day.
Would the OPT Fair Tax Act change this?
It would end the Social Security and Medicare exemption for OPT, but it is not law. The OPT Fair Tax Act, S. 2940, has sat in the Senate Finance Committee since September 30, 2025. Its House version, H.R. 8972, was referred to the Ways and Means Committee on May 21, 2026. If enacted, it would apply from the first full month after enactment. Status on October 27, 2026.
When does each step happen?
| When | What happens |
|---|---|
| Calendar years 1 to 5 | Days exempt, no payroll tax |
| January 1 of year 6 | Your days start to count |
| Day 183 of year 6 | Resident from your first day that year |
| April 15, 2027 | 2026 return due with Form 8843 |
What should you do now?
- List every calendar year you spent in the US on an F-1 or J-1 visa, including earlier degrees.
- Find your sixth calendar year, and tell your payroll team before January 1 of that year.
- Check your pay stubs: no Social Security or Medicare while you are a nonresident, both once you are a resident.
- If your employer withheld them in error, ask for a refund first, then file Form 843 with Form 8316.
- For 2026, file Form 1040-NR with Form 8843 while you are a nonresident, by April 15, 2027.
For more, see our guide for visa holders and new US residents.
Sources.
- 26 U.S.C. § 7701(b), the substantial presence test and the 5-year student limit
- Treas. Reg. § 301.7701(b)-3, exempt individuals and any part of a calendar year
- 26 U.S.C. § 3121(b)(19), the F-1 exemption from Social Security and Medicare tax
- IRS Publication 519, U.S. Tax Guide for Aliens
- IRS, Foreign student liability for Social Security and Medicare taxes
- IRS, Rev. Proc. 2025-32, 2026 tax brackets and standard deduction
- IRS Publication 15 (2026), Social Security and Medicare rates and wage base
- IRS Form 8843, Statement for Exempt Individuals
- 8 C.F.R. § 214.2(f)(10), OPT and the 24-month STEM extension
- IRS, Report of Foreign Bank and Financial Accounts (FBAR)
- S. 2940, OPT Fair Tax Act, as introduced
- H.R. 8972, OPT Fair Tax Act, as introduced