US DIGNITY Act 2025 Could End Tax Break for Foreign Students on OPT

The proposed DIGNITY Act 2025 could bring a sweeping change to US immigration and tax policy by ending the long-standing FICA tax exemption for international students working under the Optional Practical Training (OPT) program. This potential shift has sparked significant concerns among universities, student groups, and employers alike.

What’s Changing?

Currently, international students working under OPT, a work opportunity that allows F-1 visa holders to gain real-world experience after graduation, are exempt from payroll taxes under the Federal Insurance Contributions Act (FICA), which funds Social Security and Medicare. This means they have not been paying the FICA tax for international students, covering both the Social Security tax for OPT students (12.4%) and the Medicare tax for foreign students (2.9%).

Under the DIGNITY Act 2025, this US OPT tax exemption would be revoked. If enacted, OPT participants and their employers would be required to pay the full FICA tax, totaling 15.3% combined.

Implications for Students and Employers

The proposed US student visa tax changes could cost OPT participants hundreds to thousands of dollars annually, directly reducing their take-home pay in an already high-cost education and living environment. For instance, a student earning $40,000 annually could lose approximately $3,060 in additional taxes.

• For students: The loss of the US OPT tax exemption could make studying in the U.S. less financially viable, potentially reducing international enrollment.
  
  
• For employers: The increased payroll costs may discourage hiring OPT graduates, especially among small businesses and startups.

Legislative Framework and Broader Context

Introduced in July 2025, the bill remains in its early stages in the U.S. House of Representatives. This tax proposal is one part of the broader US immigration reform 2025 package under the DIGNITY Act 2025, which also includes:

• Dual-intent F-1 student visas, removing the requirement for students to prove they intend to leave after studies.
• Expanded eligibility for O visas tailored for STEM and medical PhD graduates.
• Green card backlog relief measures, including faster processing, higher per-country caps, and protections for long-term visa holders and their families.

Institutional Concerns and Policy Debate

• Universities warn that losing the FICA exemption may erode the U.S.’s competitive edge in attracting global talent, especially in high-demand STEM fields.
• Critics argue the change contradicts the bill's own goals of fostering competence and diversity.
• USCIS Director Joseph Edlow has denounced OPT as "a workaround for cheaper labor," reflecting growing opposition among some conservative lawmakers.

What Lies Ahead?

The DIGNITY Act 2025 is still under review in the House of Representatives, with no set timeline for passage or implementation. Students, universities, and advocacy groups are closely monitoring developments and preparing for the possibility of significant US student visa tax changes that could reshape the financial and employment landscape for international graduates in the United States.