US Considers Ending OPT Tax Exemption for International Students
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The US is once again placing its post-study work routes under scrutiny as new legislation proposes ending long-standing tax exemptions for international students on Optional Practical Training (OPT). The OPT Fair Tax Act, introduced by Republican senator Tom Cotton, seeks to remove payroll tax breaks that currently spare students from paying into the Federal Insurance Contributions Act (FICA), which funds Social Security and Medicare.
International students on OPT are exempt because most cannot access Social Security benefits, yet the proposal argues that the exemption gives employers an unfair incentive. Senator Cotton said the US tax system “shouldn’t incentivise businesses to hire foreign workers”, adding that ending the FICA exemption would “put American workers first”.
If enacted, the legislation would impose the full 15.3% FICA tax on OPT participants, split evenly between employees and employers. Analysts warn this would significantly reduce students’ take-home pay and raise hiring costs for companies. Boston College professor Chris Glass noted that while the exemption creates a hiring advantage of around 8%, its rationale remains valid given the lack of benefit access for F-1 students.
The proposed reform forms part of a broader political push in the US to limit or dismantle OPT. Previous calls to end the workstream have come from senior Republican figures, including senator Chuck Grassley and former USCIS director Joseph Edlow. Several legislative attempts to abolish OPT have also been introduced in recent years.
However, experts believe substantial changes are more likely to occur through the Department of Homeland Security rather than through Congress. Since OPT was created by regulation, DHS holds the authority to modify or restrict the programme independently. Glass cautioned that a major rollback could disrupt over 240,000 students currently on OPT and could heavily influence future enrolments, especially as many students consider post-study work opportunities essential. In a recent NAFSA survey, more than half of international students said they would not have chosen the US without OPT.
The renewed debate coincides with wider uncertainty in American immigration policy, including changes to the H-1B visa system and significantly higher petition fees, amplifying concerns about the US’s appeal to global talent.
Source: THE PIE NEWS
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