After H1B, OPT Tax Burden Will Hit Indian Students
On 19th September 2025, the USA administration announced an increase in the H1B visa fees to $100,000 for new applications. Existing H-1B visa holders and those who have already submitted applications are not affected by this new policy. Meanwhile, there are proposed changes to the Optional Practical Training (OPT) program, which many international students rely on after completing their studies. This program permits international students on F1 visas to work in the USA for up to a year after graduation. Among the proposed reforms are the Dignity Act and the HIRE Act, which aim to introduce new OPT tax impacting Indian students and US companies that invite skilled workers from abroad. Currently, international students working under the OPT program are not required to pay taxes. All these changes will make it challenging for Indian students aiming to study and work in the USA. Read this article to explore more about the proposed OPT tax and its impact on Indian students.
This Story also Contains
- How is H1B Connected to OPT in USA?
- What is the Dignity Act?
- What is the HIRE Act?
- How OPT Tax Will Affect Indian Students?
How is H1B Connected to OPT in USA?
OPT, or Optional Practical Training, is a program that allows international students on F1 visas to work in the USA in jobs related to their field of education. This is permitted for a period of 12 months after graduation and has the possibility of extending that period for STEM graduates. Therefore, OPT is a pathway for international students to work in USA and later transition to H1B status.
So, if there are any changes to OPT rules, like adding an OPT tax, it will majorly impact international students. With the recent increase in H1B fees, employers might become more selective about sponsoring H1B applications. This could make the transition from OPT to H1B more challenging for many students unless they are highly skilled. In addition, if international students are asked to pay the OPT tax, then it will be an addition to their costs and can cause financial challenges.
What is the Dignity Act?
The Dignity Act in the USA is a proposal to end the FICA (Federal Insurance Contributions Act) tax exemption for international students on Optional Practical Training (OPT). FICA is a payroll tax for Social Security and Medicare. Currently, OPT students working in USA do not have to pay Social Security and Medicare taxes. However, if the Dignity Act is passed, these students would be required to contribute to both the employee and the employer.
The tax rates are as follows:
Social Security is 6.2% from the employer and another 6.2% from the employee, totaling 12.4%.
For Medicare, it is 1.45% for both employee and employer, making it 2.9% in total.
This means that an OPT worker would see a reduction in their wages due to the employee tax, while employers would face higher costs for hiring OPT employees.
What is the HIRE Act?
The HIRE Act stands for the Halting International Relocation of Employment Act. It is another proposal on how to manage outsourcing and the use of international labor in USA. Under this Act, US companies that outsource jobs to international workers will be liable to pay 25% tax on the related payments. The goal here is to reduce the number of international labor including both remote work and offshoring. International students are indirectly impacted by this Act, as businesses that employ international workers somewhere rely on students working under OPT.
How OPT Tax Will Affect Indian Students?
These ongoing changes in the policies in USA are going to impact Indian students as they are one of the biggest international communities in USA. The impact on Indian students will be as follows:
Reduced Income During OPT: For many Indian students, the OPT tax will impact their earnings negatively as out of the money they earn and considering the high cost of living in the USA, an additional expense will reduce their income in hand.
Strategic Employing: With the additional financial burden on employers and the higher costs associated with HIRE, companies might not prefer OPT workers. Companies might prefer hiring USA citizens or permanent residents instead.
Challenges in the OPT to H1B Transition: The recent introduction of a $100,000 fee for new H1B applications means that many employers might only be willing to sponsor H1Bs for senior-level positions. As a result, students on OPT could find it difficult to get H1B sponsorship. In addition to the H1B visa fee, the OPT tax is an added cost for employers if the HIRE Act is passed.
Also Read:
Frequently Asked Questions (FAQs)
Q: Is OPT valid after H-1B approval?
A:
No, OPT gets invalid after H1B is approved. Both F1 visa and OPT end once an applicants get their H1B approved. In addition, the rules of H1B will be applied as soon as one gets an H1B.
Q: What is OPT for Indian students in USA?
A:
OPT is like a bridge program that allows international students on F1 visas to work in the USA for a period of 12 months after graduation. This period can be extended for STEM graduates.
Q: What percentage of H-1B visa is given to Indians?
A:
In 2024, 71% of H1B visas were approved for Indian candidates. This was the highest number of applications approved for H1B visas. Hence, with the new policy of the H1B visa fees, Indians will be highly affected.
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