OPT Tax Guide: Everything F1 Students Need to Know

Congratulations - you've graduated, landed an OPT position, and you're finally earning real money in the U.S. Now comes the question nobody prepared you for: how do taxes work on OPT?

The good news: if you're still within your first five years in the U.S., you're likely exempt from Social Security and Medicare taxes, which saves you 7.65% of your paycheck.

The tricky part: many employers (and even some payroll software) don't understand this exemption and withhold these taxes anyway.

Let's break down everything you need to know.

Your Tax Status on OPT: Still a Nonresident (Probably)

Here's the key thing to understand: OPT doesn't change your tax status.

If you've been in the U.S. for five calendar years or less on an F1 visa, you're still a nonresident alien for tax purposes - regardless of whether you're studying or working.

This means:

You still file Form 1040-NR (not the regular 1040)

You're still only taxed on U.S.-source income

You still can't use TurboTax or H&R Block

You're still exempt from FICA taxes (Social Security and Medicare)

Your immigration status (F1 with OPT authorization) is different from your tax status (nonresident alien). Don't confuse the two.

The FICA Exemption: Saving 7.65% of Your Paycheck

FICA stands for Federal Insurance Contributions Act - the taxes that fund Social Security and Medicare. For most workers, FICA is:

Social Security Tax: 6.2% (on income up to $168,600 in 2025)

Medicare Tax: 1.45%

Total: 7.65%

F1 students on OPT are exempt from FICA taxes for their first five calendar years in the U.S.

On a $70,000 OPT salary, that's $5,355 per year you shouldn't have to pay.

How to Ensure Your Employer Doesn't Withhold FICA

When you start your OPT job, make sure your employer knows you're FICA-exempt. Here's how:

1. Inform HR/Payroll in writing

Send an email stating: "I am an F-1 student on OPT. I have been in the U.S. for [X] calendar years, which means I am exempt from Social Security and Medicare taxes under IRS regulations (IRC Section 3121(b)(19)). Please ensure FICA taxes are not withheld from my paycheck."

2. Provide documentation

Include a copy of your:

I-20 showing OPT authorization

I-94 record

Brief timeline of your calendar years in the U.S.

3. Complete Form 8233 if needed

Some employers use Form 8233 (Exemption from Withholding) to document FICA exemption. Your payroll department should know if this is required.

What If Your Employer Already Withheld FICA?

It happens more often than it should. Large employers with automated payroll systems often don't have proper handling for nonresident alien exemptions.

If FICA was withheld incorrectly, you have two options:

Option 1: Request a refund from your employer

This is the IRS's preferred method. Ask your employer's payroll department to:

Refund the incorrectly withheld FICA taxes

Issue a corrected W-2

Many employers will do this, especially if you catch it early.

Option 2: Claim a refund directly from the IRS

If your employer refuses or can't issue a refund, you can file:

Form 843 (Claim for Refund and Request for Abatement)

Form 8316 (Information Regarding Request for Refund of Social Security Tax)

This process takes several months, but you will get your money back.

Federal Income Tax on OPT

While you're exempt from FICA, you're not exempt from federal income tax. Your OPT income is taxable just like any other U.S.-source income.

As a nonresident alien, your federal income tax is calculated based on:

Your total U.S.-source income

Tax treaty benefits (if your country has one with the U.S.)

Limited deductions available to nonresidents

You'll receive a W-2 from your employer by January 31, showing your total wages and tax withheld. This is the main document you'll need to file your tax return.

State Income Tax on OPT

State tax requirements depend entirely on where you work. There are three categories:

States with no income tax (lucky you):

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming

If you work in one of these states, you don't need to file a state return.

States with income tax:

Most states require you to file a state tax return if you earned income there. The forms and rules vary by state.

Special case: California, New York, Illinois

These three states have the largest international student populations and the most complex state tax requirements:

California: File Form 540NR (Nonresident or Part-Year Resident)

New York: File Form IT-203 (Nonresident and Part-Year Resident)

Illinois: File Form IL-1040 with Schedule NR

F1TaxReturn supports all three of these states for $30 each - far less than the $50+ competitors charge.

Tax Treaties on OPT

Many countries have tax treaties with the U.S. that provide special benefits for students and trainees. However, treaty benefits work differently on OPT than they do while you're studying.

Common treaty benefits for OPT workers:

India (Article 21): Exempts students and trainees from tax on payments for maintenance, education, or training. Also allows the standard deduction. These benefits may continue into OPT.

China (Article 20): Provides exemption for students and trainees, but with specific limitations.

South Korea (Article 21): Similar benefits for students.

Not all treaties apply to OPT employment the same way they apply to student stipends. The tax software you use should automatically check for applicable treaty benefits based on your situation.

Key Documents You'll Need to File Taxes on OPT

When tax season arrives (January - April), gather:

From your employer:

W-2 (Wage and Tax Statement) - you should receive this by January 31

From your school/previous records:

Form I-20 (to verify OPT dates)

Previous year's tax return (if you filed one)

Dates of entry/exit to/from the U.S.

From your bank (if applicable):

1099-INT (interest income over $10)

1099-DIV (dividend income)

When to File Taxes on OPT

The federal tax deadline is April 15, 2026 for tax year 2025.

State deadlines vary - most align with the federal deadline, but always check your specific state.

The Bottom Line

OPT changes your financial situation dramatically, but your core tax status stays the same for your first five years. File as a nonresident, claim your FICA exemption, and don't let your employer over-withhold.

Working on OPT in California, New York, or Illinois? F1TaxReturn handles your federal return free and state returns for just $30.