The Ultimate Tax Guide For International Students On OPT

What is OPT?

Optional Practical Training (OPT) is an opportunity for international students under an F-1 visa to work in the US for 12 months. After this, STEM students (Science, Technology, Engineering and Mathematics) can extend this period up to 24 months.

Most students complete OPT after graduating from university. Others participate after they have been pursuing their degree for more than nine months and are entitled to work and gain practical knowledge in the field of their studies.

Types of OPT

There are three types of Optional practical training:

  1. Pre-completion OPT – This type of OPT is authorized before graduation if CPT (Curricular Practical Training) is not an option. Students can work part-time, during their university semester. The work experience must be related to their studies.
  2. Post- Completion OPT– This is the most common type of OPT. It is authorized for 12 months after graduation.
  3. Stem-extension OPT– This is a 24-month extension for students in STEM (Science, Technology, Engineering and Mathematics) programs.

Do I have to pay taxes while in the US for OPT?

Yes, if you earn income while in the US for OPT you are required to pay your Federal and State income taxes.

You must also complete a W-4 tax form with your new employer when you start a new job.

Student on OPT visa smiling

Residency status of OPT students

It’s crucial to determine your residency status for tax purposes. Usually, a graduate/ student in F-1 status that has been in the USA for less than 5 years is considered a nonresident alien for tax purposes.

If you have been in the USA for more than 5 years, you will be typically considered a resident alien for tax purposes.

By taking the Substantial Presence Test (which you can complete for FREE with Sprintax) you can determine your Residency status.

Federal income tax rates for OPT students

The IRS requires federal income tax withholding on all U.S. source payments to nonresident alien students.

OPT as well as individual students are taxed on their wages at graduated rates (10% to 39.6%). It is depending on your income level.

The tax percentage withheld on scholarships and grants for F-1 and J-1 visa holders is 14%.

You may also have to pay state tax on your income depending on where you live in the U.S. and your personal circumstances.

Prepare my OPT student tax return with Sprintax

OPT student tax exemptions

As an F-1 visa holder, you are exempt from FICA (Social Security and Medicare) taxes.

This means that no matter whether you are doing OPT, OPT extension or CPT (Curricular Practical Training), you are exempt from paying Social Security and Medicare taxes unless you’ve been in the United States for more than 5 years.

Read more about the student FICA tax exemption and how to claim a FICA tax refund here.

How to file taxes when in the US for OPT?

As a student, you will need to file Form 8843 and Form 1040NR-EZ or 1040NR. If you have dependents you will need Form 1040NR. Read more about the difference between forms 1040-NR and 1040-NR-EZ here.

Sprintax is the only self-preparation tax software for nonresidents. The process is fast and simple.

After answering a few questions, the system will estimate your personal circumstances, determine your residency status and prepare the tax forms that you need to file.

You can contact Sprintax Live Chat, our tax agents will answer all your questions and help you with the tax preparation process.

With Sprintax you can:

  • Save time and stress!
  • Determine your residency status
  • Prepare a fully compliant US tax return
  • Maximize your State tax refund
  • Avail of our 24/7 Vita Qualified Live Chat facility

Prepare your OPT student tax return today!

OPT to the H1B tax filing

H-1B status is not exempt from Substantial Presence test and very often H1B visa holders become resident or a dual-status resident in the year of visa change.

Depending on their personal circumstances, F-1 students may claim a tax treaty which can partially reduce or fully exempt their income from paying taxes.

However, H1B visa holders must pay FICA tax and are usually not entitled to use tax treaty benefits for students and scholars. Check out this detailed guide on filing taxes on an H1B visa.

Remember, if you have questions about your personal tax situation, our Live Chat team are online 24/7 to support you.

Do OPT students get a tax refund?

Yes. Every year, thousands of OPT participants overpay taxes in the USA and are entitled to a tax refund when they file their tax return.

Sprintax will help you with the preparation of your tax documents and will make sure you claim the maximum legal tax refund.

Form W-9 on OPT

Form W-9 may be required if the OPT participant becomes resident for tax purposes. In this case, you will need to complete a W-9 form and provide it to your employer.

Prepare my OPT student tax return with Sprintax.

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Kristina Valcheva

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