Proposal to Remove Tax Exemptions for Foreign Workers Under OPT Program

What is OPT and OPT Tax Exemption?

The Optional Practical Training (OPT) program gives F1 visa holders the opportunity to work in their field of study for up to 12 months after graduation. Currently, the OPT students are exempt from FICA taxes, which means neither the student nor the employer has to pay those payroll taxes. However, Senator Tom Cotton has submitted the OPT Fair Tax Act, which aims that OPT participants and their employers should pay the FICA taxes. Additionally, the DIGNITY Act of 2025 also proposes to eliminate the FICA exemption for international students on OPT, making them liable for Social Security and Medicare taxes.

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What is $250 Visa Integrity Fee?

Starting from 1st October 2025, applicants for the USA non-immigrant visa including international students, workers, or tourists, will be required to pay a new $250 Visa Integrity Fee. This fee, introduced through the Consular Integrity and Security Act (CISA), is in addition to the regular visa fees. This means it is going to be more expensive for applicants, including those from India. This fee is applicable only when a visa is actually issued, so if your application is denied, you will not have to pay it. The Visa Integrity fee of $250 can be refunded under certain conditions. If you leave the USA within five days of your visa expiring and do not apply for an extension or change of status, you might be eligible for a refund. However, if you hold a long-term visa, like F1 or H1B, the refund process can get challenging.

Potential Impacts of Tax Removal on International Students

The following impacts will be experienced by international students if OPT tax exemption is removed.

1. Reduced Take-Home Income: If those on OPT have to start paying FICA taxes, their take-home pay could take a serious hit. For instance, with a salary of $40,000, the additional 15.3% tax could mean losing over $6,000 a year.

2. Selective Hiring: Employers will get selective about hiring OPT workers, as the cost of labor would increase. This is particularly a concern for startups or small businesses that are already operating on tight budgets.

3. Higher Cost of Studying & Staying in the USA: With the added tax burden and the $250 visa integrity fee, international students are given an added financial burden which increases their overall cost of studying and living in USA.

4. Increased Uncertainty: Since these proposals are still not approved international students are left in a state of uncertainty. The career plans are affected as fewer job opportunities and a greater financial burden are a risk for international students.

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