International students in the United States have the opportunity to gain valuable work experience through the Optional Practical Training program. While the benefits of OPT are numerous, one of the most overlooked yet crucial aspects of participating in this program is understanding your tax responsibilities. Filing taxes may not be the most exciting part of student life, but it’s an important legal requirement that can affect your immigration status, financial health, and future opportunities.
This guide breaks down what OPT is, the different types available, and how taxes work for international students participating in this program. Whether you’re already working under OPT or preparing to apply, it’s essential to stay informed about how the U.S. tax system applies to you.
What Is OPT?
Optional Practical Training is a temporary employment authorization available to students in F-1 visa status. It allows international students to work in the United States for up to 12 months in a field directly related to their academic major. Students in designated science, technology, engineering, or mathematics fields may be eligible for a 24-month extension, bringing the total possible work period to 36 months.
The primary goal of OPT is to allow students to apply what they’ve learned in the classroom to real-world work situations. Most students apply for post-completion OPT after finishing their degree, but pre-completion options are also available under certain conditions.
Types of OPT
Understanding the different types of OPT is essential because each has specific rules, timelines, and tax implications. OPT can be broadly divided into three categories based on the timing of the work authorization.
Pre-Completion OPT
Pre-completion OPT refers to employment authorization granted before a student completes their degree program. This option is generally used when Curricular Practical Training (CPT) is unavailable or not suitable for the student’s situation. Under pre-completion OPT, students are only permitted to work part-time while school is in session and full-time during official school breaks.
Since pre-completion OPT occurs while the student is still enrolled, the authorization is typically deducted from the total 12-month allotment available for OPT. That means if you use 4 months of pre-completion OPT, you’ll have only 8 months of post-completion OPT available.
Post-Completion OPT
Post-completion OPT is the most widely used form of training. It begins after the student has completed all requirements for their degree. Employment under post-completion OPT must be full-time, and the work must be directly related to the student’s field of study. This period offers students a chance to gain professional experience in the U.S. before deciding whether to pursue other visa categories such as H-1B.
Post-completion OPT must be completed within 14 months of graduation, and students must apply for authorization before the completion of their program. The job must start within 90 days of receiving OPT approval to maintain valid immigration status.
STEM OPT Extension
Students in STEM fields may be eligible to extend their OPT for an additional 24 months, resulting in a total of 36 months of work authorization. To qualify for the extension, the employer must be enrolled in the E-Verify system and the student must hold a degree in an eligible STEM major.
The STEM OPT extension provides additional opportunities for hands-on experience and may increase a student’s chances of transitioning into an H-1B work visa or another employment-based status. The extended time also influences tax residency considerations, which we’ll discuss further in this guide.
Do OPT Students Have to Pay Taxes?
One of the most common questions international students have is whether they are required to pay taxes while on OPT. The simple answer is yes. If you earn income through employment or internships while on OPT, you are subject to U.S. income tax laws.
This includes both federal income tax and, in many cases, state income tax depending on your state of residence. Even if your job is part-time or low-paying, the Internal Revenue Service requires that all income be reported and taxed accordingly.
When starting a new job, you will need to complete IRS Form W-4. This form instructs your employer on how much tax to withhold from your paycheck based on your residency status and estimated earnings. Incorrectly completing this form could lead to over-withholding or underpayment, both of which can affect your financial situation and refund eligibility.
Federal Tax Rates for OPT Students
The federal income tax system in the United States is progressive, meaning tax rates increase as income increases. Here are the current tax brackets for individual filers for the 2025 tax year:
- Income from $0 to $11,925 is taxed at 10 percent
- Income from $11,926 to $48,475 is taxed at 12 percent
- Income from $48,476 to $103,350 is taxed at 22 percent
- Income from $103,351 to $197,300 is taxed at 24 percent
- Income from $197,301 to $250,525 is taxed at 32 percent
- Income from $250,526 to $626,350 is taxed at 35 percent
- Income above $626,351 is taxed at 37 percent
For students, it’s rare to fall into the higher brackets, but even low-income jobs are subject to tax withholding. Scholarships and grants that are not directly applied to tuition or educational expenses may also be taxed at a flat rate of 14 percent.
State Income Tax
State tax obligations vary significantly across the U.S. Some states do not impose income tax at all, while others have progressive tax systems similar to the federal structure. States that currently do not tax earned income include:
- Alaska
- Florida
- Nevada
- New Hampshire (taxes investment income only)
- South Dakota
- Tennessee (taxes investment income only)
- Texas
- Washington
- Wyoming
If you’re working in a state with income tax, you’ll likely need to file a separate state return. Be aware that moving between states during the year may require multiple filings, depending on the income earned and the dates of residency in each location.
Filing Deadline and Penalties
All residents and nonresidents must file their federal tax return by the deadline set by the IRS. For the 2025 tax year, the deadline is April 15. If you fail to file by this date, you may be subject to penalties, including late fees and interest on any unpaid taxes.
Failure to comply with tax obligations can also jeopardize future immigration benefits. When applying for permanent residency, work visas, or travel permits, past tax records are often scrutinized. Being tax compliant can strengthen your case and avoid unnecessary complications.
Importance of Tax Residency Status
Your tax residency status determines which forms you file, how your income is taxed, and whether you’re eligible for certain credits or exemptions. As a general rule, students on F-1 visas are considered nonresident aliens for tax purposes for the first five calendar years they are in the U.S.
After five years, most students will be classified as resident aliens. This change affects how income is taxed and what deductions are available. Resident aliens follow the same tax rules as U.S. citizens, which may allow them to claim additional tax benefits.
The IRS uses the Substantial Presence Test to determine residency. This test counts the number of days you’ve been physically present in the U.S. over the past three years. If you meet the threshold under this test, you may be required to file as a resident even if you’re still on a student visa.
Social Security and Medicare Taxes
International students working under OPT are generally exempt from Social Security and Medicare taxes, also known as FICA taxes. This exemption usually applies for the first five years a student is in the U.S. on an F-1 visa. However, once you become a resident alien or switch to another visa category such as H-1B, this exemption may no longer apply.
It’s important to verify your pay stubs to ensure your employer is not withholding these taxes incorrectly. If FICA taxes have been withheld from your paycheck when you are exempt, you can file a refund request through IRS Form 843 or directly with your employer.
When to File and What Documents Are Needed
The tax filing process begins in January when employers issue Form W-2, which details your income and withholdings for the previous year. If you received scholarships or grants, you might also receive Form 1042-S. Freelance or independent work may require Form 1099.
Nonresident students typically need to file IRS Form 8843 each year to maintain tax compliance, even if they earned no income. If income was earned, Form 1040-NR must be filed in addition to Form 8843.
Additional forms may be necessary for state tax returns, treaty benefits, or education-related deductions. Carefully organizing these documents ahead of time can reduce errors and streamline the process.
Determining Your Tax Residency Status
Before filing a tax return in the United States, international students must determine whether they are a resident alien or a nonresident alien for tax purposes. This classification affects the forms you use, the types of income that are taxable, and your eligibility for deductions and credits.
Nonresident Alien Status
Students on an F-1 visa are generally considered nonresident aliens during their first five calendar years in the U.S. This means they are only required to pay tax on U.S.-sourced income and are ineligible for many tax credits and deductions available to residents.
The five-year rule is counted based on calendar years, not academic years. For instance, a student who arrived in the U.S. in August 2021 would be considered a nonresident for tax years 2021 through 2025, assuming they remain in F-1 status the entire time.
Resident Alien Status
Once the five-year period has passed, students are generally classified as resident aliens for tax purposes. At that point, they are subject to U.S. taxation on worldwide income and can file using the same forms as U.S. citizens. They also become eligible for a broader range of deductions and tax credits.
Resident alien status is determined using the Substantial Presence Test. This test calculates your presence in the U.S. over a three-year period using the following formula:
- All the days you were present in the current year
- One-third of the days you were present in the previous year
- One-sixth of the days you were present in the year before that
If the total equals or exceeds 183 days, you may be considered a resident alien unless you are exempt due to your visa status.
Forms Required for Nonresident Aliens
Understanding which forms to file is essential for maintaining compliance with federal tax laws. Nonresident aliens on OPT are generally required to file the following forms:
Form 8843
This is a statement for exempt individuals and individuals with a medical condition. All F-1 visa holders, including those without any income, must file this form each year they are in the United States as nonresidents.
Form 8843 documents your visa status and the number of days you were in the U.S., confirming that you should not be counted as a resident under the Substantial Presence Test. Even students without a job or income must complete and submit this form to the Internal Revenue Service.
Form 1040-NR
This is the U.S. Nonresident Alien Income Tax Return. If you earned income in the U.S. while on OPT, you must file Form 1040-NR. This form allows you to report wages, salaries, tips, scholarships, and any other taxable income.
Nonresident aliens are not allowed to use Form 1040, 1040A, or 1040EZ unless their status changes to that of a resident alien. Using the incorrect form can result in filing errors, rejections, or the loss of tax treaty benefits.
State Tax Forms
If you lived and worked in a state that levies an income tax, you must also file a state tax return. Each state has its own forms and procedures, and these are generally separate from your federal filing. If you moved between states during the year, you might need to file multiple state tax returns, depending on the time spent and income earned in each.
Understanding Income Types and Taxability
Nonresident students must pay federal income tax on wages earned through practical training, assistantships, and certain scholarships or grants. However, not all forms of financial aid are considered taxable.
Wages and Salaries
Any compensation received from employment while on OPT is considered taxable income. This includes hourly wages, salaries, stipends, or bonuses. These must be reported on your tax return and will typically be documented on Form W-2, which your employer will issue by the end of January following the tax year.
Scholarships and Grants
Scholarships that are used for tuition, fees, books, and supplies required for coursework are not considered taxable income. However, any portion used for non-qualified expenses such as room and board, travel, or optional equipment is considered taxable and must be reported.
These amounts are usually reported on Form 1042-S. Make sure to differentiate between qualified and non-qualified scholarship funds when completing your return.
Independent Contractor or Freelance Income
Income earned from freelance work or independent contracting must be reported on Form 1099-NEC or Form 1099-MISC. This type of income is also taxable for nonresidents and may be subject to self-employment tax in some cases, although nonresidents are generally exempt from paying Social Security and Medicare taxes.
Exemptions from FICA Taxes
FICA taxes refer to Social Security and Medicare taxes, which are typically withheld from employee paychecks. However, international students in F-1 status are generally exempt from paying FICA taxes while they are considered nonresident aliens.
This exemption remains in effect for up to five calendar years from your initial date of arrival. If your employer mistakenly withholds FICA taxes during this time, you can request a refund either from your employer or by filing IRS Form 843 along with supporting documentation.
After the five-year exemption period, students may become subject to FICA tax unless they remain in a valid F-1 visa status with appropriate authorization.
Tax Treaties and Income Exemptions
The United States has tax treaties with over 60 countries, and many of these treaties provide benefits to international students. These treaties may offer partial or full exemption from federal income tax on certain types of income, such as wages, scholarships, or fellowships.
Whether you’re eligible for treaty benefits depends on your home country and the specific terms of the agreement. You must claim these benefits using the appropriate section of Form 1040-NR. You may also be required to submit Form 8833, which discloses your treaty-based return position to the IRS.
Claiming treaty benefits may significantly reduce your tax liability, but doing so incorrectly can lead to penalties or even visa complications. It’s essential to review the treaty agreement between the U.S. and your home country to determine eligibility and ensure accurate reporting.
Available Tax Credits for OPT Students
While nonresident aliens are generally ineligible for most tax credits available to residents, there are a few exceptions depending on specific circumstances and treaty benefits. In some rare cases, nonresidents may qualify for the following:
Foreign Tax Credit
If you paid income tax to your home country on the same income reported in the U.S., you might be eligible for a foreign tax credit. This prevents double taxation and can be claimed on Form 1116.
Child Tax Credit
This credit is generally available only to residents, but certain treaties may allow limited eligibility for nonresidents. You must have a valid Individual Taxpayer Identification Number (ITIN) or Social Security Number for any dependents to claim this credit.
Education Credits
Nonresidents are not eligible for the American Opportunity or Lifetime Learning credits unless their status changes to resident alien. However, once a student meets the residency requirements, these credits may be available to help offset tuition and other educational costs.
ITIN vs. SSN
To file a tax return, international students need either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). If you are employed while on OPT, you likely already have an SSN. If you are not employed but need to report taxable scholarship income, you may need to apply for an ITIN using Form W-7.
An SSN is issued by the Social Security Administration and is used primarily for employment. An ITIN is issued by the IRS for tax purposes only and does not authorize work.
Make sure your identification number is entered correctly on all tax forms to avoid delays in processing your return or refund.
Moving from OPT to H-1B: What Changes?
The Optional Practical Training program allows F-1 students to work temporarily in the United States. Once OPT concludes, many students apply for an H-1B visa, a non-immigrant visa that allows U.S. companies to employ foreign workers in specialized fields.
This transition impacts your tax responsibilities, especially with respect to residency status, eligibility for certain exemptions, and obligations to pay different types of taxes. Understanding how these changes affect your tax filings is essential to remain compliant with U.S. tax law.
Residency Status Shift
F-1 students are typically considered nonresident aliens for the first five calendar years of their stay in the U.S. However, H-1B visa holders are subject to the Substantial Presence Test, which means that after transitioning to H-1B, most individuals will be classified as resident aliens for tax purposes.
This status change brings with it several implications. As a resident alien, you are taxed on worldwide income, not just U.S.-sourced income. You must also file using Form 1040 instead of Form 1040-NR and will no longer be eligible for exemptions typically offered to students.
Ending FICA Exemptions
One major difference is the loss of exemption from FICA taxes. While students in F-1 status are generally not required to pay Social Security and Medicare taxes, those holding an H-1B visa are subject to these taxes. Your employer will begin withholding them automatically from your paycheck, and these contributions will be reflected on your W-2 at year-end.
This change increases your overall tax burden, so it’s important to be prepared for reduced take-home pay once your H-1B status begins.
Tax Forms After Changing to H-1B
Once you change to an H-1B visa and are classified as a resident for tax purposes, you must use different forms when filing your federal tax return.
Form 1040
Resident aliens file Form 1040, which is the standard tax return used by U.S. citizens and permanent residents. Unlike Form 1040-NR, this version includes a wide range of credits, deductions, and tax benefits.
If your visa status changed mid-year, you might qualify as a dual-status taxpayer. In this case, you would file a dual-status return, which includes both Form 1040 and a statement with Form 1040-NR. Specific rules apply to this situation, and accurate calculation of your residency days is essential.
State Tax Forms
State residency rules may also change after your H-1B approval. Many states determine residency differently than the federal government, which could affect your eligibility for state credits or deductions. Ensure that your state return aligns with your visa and physical presence status throughout the year.
Starting a New Job on OPT or H-1B: Tax Preparation Tips
Whether you’re beginning your career on OPT or continuing under an H-1B visa, tax compliance starts the moment you accept a job. Being proactive with your paperwork and understanding your tax withholding responsibilities can save you time and reduce the risk of financial penalties.
Completing Form W-4
Form W-4 is used by your employer to determine how much federal income tax should be withheld from your paycheck. It’s essential to complete this form accurately based on your current residency status and expected income.
Nonresident aliens typically must follow specific instructions that limit available allowances, while resident aliens have more flexibility in how they complete the form. Be cautious not to claim exemptions or deductions you are not entitled to, especially if you are still a nonresident.
Form W-9 vs. W-8BEN
As your residency status changes, you may be asked to complete a different form. Residents use Form W-9, which provides your Taxpayer Identification Number for reporting income. Nonresidents may be asked to complete Form W-8BEN to certify their foreign status and claim treaty benefits.
Make sure to provide your employer with the correct form for your status. Using the wrong form can result in incorrect tax withholding and complications when filing your return.
Keeping Records
Keep all job-related documentation, including offer letters, visa status notifications, I-94 records, and pay stubs. These documents can help you determine your tax status and support any claims or exemptions made on your tax return.
If you’re switching jobs during the year, collect and retain all W-2s and related tax forms from each employer. You will need them when preparing your year-end tax filings.
Missed a Prior Year Filing? Here’s What to Do
Sometimes, international students miss filing a required tax return during previous years. Whether due to oversight, confusion, or lack of income, it’s important to address missed filings as soon as possible.
Filing a late return not only helps you stay compliant but may also lead to a refund if too much tax was withheld. There’s generally a three-year window to claim a refund for a previous tax year. Beyond that, the IRS may not issue a refund, even if one is due.
If you did not file Form 8843 in a previous year, you should still submit it to document your exempt status. Including an explanation with your late submission can help clarify your situation to the IRS.
Tax Refunds for OPT and H-1B Workers
Many international students on OPT unknowingly overpay federal or state taxes due to incorrect withholding or ineligibility for certain taxes such as FICA. When tax season arrives, they may be entitled to a refund.
Common Reasons for Refunds
- Over-withholding of federal income tax
- FICA taxes withheld in error
- State tax withheld in a state where you were not a resident
- Ineligibility for income tax due to treaty benefits
A proper review of your pay stubs, W-2s, and applicable treaties can help you determine whether you are owed money. Even if your income was modest, a refund may still be available.
Average Refund Amounts
While refund amounts vary, international students working on OPT frequently receive significant refunds due to overpaid taxes. Depending on your income level, location, and any misclassified withholdings, you may be eligible for several hundred dollars or more.
It’s important to file accurately and on time to claim your refund. If your residency status changes during the year, be sure to calculate taxes according to your specific filing position, whether nonresident, resident, or dual-status.
Dual-Status Filers: Special Considerations
If you changed your visa status during the tax year—for example, transitioning from F-1 OPT to H-1B—you may be classified as a dual-status alien. This means that you were a nonresident for part of the year and a resident for the remainder.
Dual-status filing can be complex. Typically, income earned during your nonresident period must be reported on Form 1040-NR, while income from your resident period is reported on Form 1040. The IRS does not allow e-filing for dual-status returns, so you must file a paper return.
You cannot claim the standard deduction as a dual-status filer, though some itemized deductions may apply. You also may not file jointly with a spouse unless an election is made to be treated as a resident for the entire year, which has implications for worldwide income taxation.
International Travel and Its Tax Implications
If you travel outside the U.S. during the tax year, your days of physical presence may be affected, especially if you are close to meeting the Substantial Presence Test threshold. Travel days can impact both your residency status and the way you file taxes.
You are generally not considered present in the U.S. for tax purposes on days you are in transit for less than 24 hours or if you are a commuter from a bordering country. However, vacation days, short trips, and even holiday travel to your home country typically count toward your total days of presence.
Carefully track your travel using official documents like your passport entry and exit stamps, I-94 records, and boarding passes. Accurate records will help you correctly calculate your tax residency status and avoid misfiling.
Planning Ahead for Future Tax Years
Understanding your current tax responsibilities is important, but planning ahead ensures long-term compliance and financial efficiency. As you move through different visa statuses, your tax situation may evolve. Staying informed helps you make decisions with confidence.
If you anticipate becoming a resident alien, consider how your income abroad, investments, or financial gifts may be taxed. Resident aliens must report all sources of income, even those earned outside the United States.
As your income increases under OPT or H-1B, your tax rate may also rise. Taking steps such as adjusting your W-4 withholding or contributing to retirement accounts can help reduce your tax liability and improve financial health.
Conclusion
Navigating the U.S. tax system as an international student on OPT or transitioning to an H-1B visa may seem daunting, but understanding your obligations is essential for staying compliant, avoiding penalties, and making informed financial decisions. Across this guide, we’ve broken down the foundational elements of your tax responsibilities from determining your residency status and filing the correct tax forms to knowing when and how to claim exemptions, deductions, and potential refunds.
OPT students are not exempt from taxes, and whether you are working part-time during your studies or full-time after graduation, federal and state tax rules apply. Your residency status for tax purposes, nonresident or resident, determines what forms you file and what income is taxable. Additionally, special exemptions such as the FICA tax exemption for students in F-1 status can significantly affect your paycheck, and knowing when those exemptions expire (typically after five years) is crucial.
As you transition from OPT to H-1B, a new set of responsibilities comes into play. Resident aliens under H-1B are required to pay FICA taxes, report global income, and are no longer eligible for many of the tax benefits designed for students. Filing accurately during this transition period, especially if you fall under dual-status filing, is important to avoid audits or delays in future immigration processes.
Starting a new job also brings tax considerations. Completing the correct forms (like W-4 or W-9), monitoring your withholdings, and reviewing your pay stubs ensures that taxes are withheld correctly. If too much tax has been taken out or if you were incorrectly charged FICA tax, you may be eligible for a significant refund. Filing on time not only helps you recover those funds but also ensures you maintain a clean record with the IRS and USCIS.
Whether you are filing Form 8843 with no income or completing a full 1040-NR or 1040 as a resident, accuracy and documentation are critical. Keep records of all travel, income, and job-related documents to support your filings. Stay updated with tax deadlines and be proactive about planning for the tax year ahead.
Understanding taxes is more than a legal necessity, it’s a financial advantage. Filing correctly opens the door to refunds, minimizes risks during visa processing, and helps you build a foundation for future stability in the U.S. With proper knowledge and planning, tax season doesn’t have to be a burden. Instead, it becomes another step in your journey toward professional growth and financial confidence in the United States.