Explained: What Indian students in the US need to know about FICA tax and OPT in 2025

For thousands of Indian students studying and working in the United States, a little-known but critical part of the paycheck calculation is the FICA tax . As debates intensify in Washington over whether to extend these taxes to foreign students on the Opt ional Practical Training (OPT) program, understanding the current rules, and the possible changes ahead is essential.
What is FICA tax?FICA stands for the Federal Insurance Contributions Act, a law that mandates payroll taxes to fund two major US social programs: Social Security and Medicare. These programs provide retirement, disability, and healthcare benefits to eligible workers and their families.

Under FICA, both the employee and the employer contribute a share of the worker’s wages, 6.2% for Social Security and 1.45% for Medicare, bringing the total payroll contribution to 15.3%. The Social Security tax applies to annual wages up to $176,100 in 2025, while the Medicare portion has no cap.

For most US workers, these deductions are automatic and unavoidable. However, for international students , especially those from India on academic or training visas, the rules differ significantly.
FICA tax and OPT: The current situationThe Optional Practical Training (OPT) program allows international students on F-1 visas to work in the US for up to 12 months after graduation, with a possible 24-month extension for STEM (science, technology, engineering, and mathematics) graduates. OPT is often a crucial bridge between academic training and full-time employment.

Under current regulations, students on OPT who still qualify as nonresident aliens are not required to pay FICA taxes. This means that neither the student nor the employer has to contribute the combined 15.3% payroll tax. For a recent graduate earning $60,000 a year, this exemption translates into a saving of roughly $4,590 annually—a significant relief for young professionals starting their careers in an expensive country.
Are Indian students required to pay FICA tax?In most cases, the answer is no, at least during the initial years of study. Indian students typically enter the United States on an F-1 visa, which classifies them as nonresident aliens for tax purposes for the first five calendar years they spend in F-1 status. During this period, their wages from campus employment, internships through Curricular Practical Training (CPT), and post-graduation work under Optional Practical Training (OPT) are exempt from FICA taxes.

This exemption recognises that international students on temporary academic visas are not considered part of the US workforce contributing to or benefiting from federal retirement programs. The same exemption generally applies to J-1, M-1, and Q-1 visa holders, though the duration of FICA exemption can differ based on the type of visa and length of stay.

After five years, if a student continues to live in the US and meets the substantial presence test, they are reclassified as resident aliens for tax purposes. At that point, unless they remain a bona fide student at their university, they become subject to FICA taxes like any other US employee.
Proposed policy changes in 2025This long-standing tax relief, however, may soon face change. In 2025, US lawmakers introduced two major proposals: the OPT Fair Tax Act and the DIGNITY Act aimed at ending the FICA exemption for foreign students participating in OPT.

If these measures become law, both students and their employers would have to pay the standard 7.65% each toward Social Security and Medicare. For Indian graduates working on OPT, that would mean smaller take-home salaries and increased hiring costs for US companies that depend on skilled international talent.

Supporters of the bills argue that the exemption gives international students an unfair advantage over American graduates in the job market, while critics contend that such a change would discourage global talent and burden students already managing high living costs and visa restrictions.

As of October 2025, these proposals remain under consideration. The existing FICA exemption continues to apply to all eligible F-1 students and OPT participants.
Why it matters for Indian studentsFor the nearly 270,000 Indian students currently in US universities, the FICA debate is more than a technical tax issue but it directly affects financial planning and employability. Many Indian graduates use their OPT period to gain vital US work experience before returning home or applying for H-1B visas. Losing the FICA exemption could reduce disposable income by hundreds of dollars per month and make OPT less attractive for both students and employers.

Financial experts and university advisors recommend that students closely monitor updates from both USCIS (US Citizenship and Immigration Services) and the IRS, check their pay slips for any erroneous FICA deductions, and, if necessary, file for a refund using IRS Form 843. Students should also ensure they file annual federal and state tax returns—even when exempt from FICA—to stay compliant with US tax laws .
The bottom lineThe FICA tax rules for international students are complex but crucial to understand, especially as policymakers debate reforms that could alter long-standing exemptions. For now, Indian students on F-1 visas whether studying, interning, or working on OPT, remain exempt from these payroll deductions.

However, as legislative discussions continue, it is wise for students and recent graduates to plan ahead, stay informed, and seek professional guidance where needed. Understanding the evolving tax landscape could help them make smarter career and financial decisions in the US.