International students here in the United States of America might be deprived of many rights that naturalized citizens of the United States of America and green card holders have. But F1 students are also allowed to get a year of OPT, that is work experience, in the United States of America. However, when working, F1 visa holders do need to pay their taxes. While filing taxes is not the most interesting part of working and living in the United States of America, the importance of filing your taxes cannot be underestimated. Keep on reading to see if F1 visa holders need to pay a social security tax. Let’s start with Do F1 Students Pay Social Security Tax.
In case an F1 visa holder does earn an income when working as an OPT or on campus, they will absolutely need to pay taxes. To do so, you will need to fill out a W-4 tax form from your employer.
Residency Of F1 Visa Holders
To determine the amount of tax an F1 visa holder will pay when they work will also be determined and influenced by the number of years they have been living in the United States of America. In case an F1 visa holder has been living in the United States of America for less than five years, they will be considered a nonresident alien. In case an F1 vis holder has been living in the United States of America for more than five years, they will be considered a resident alien.
The thing with social security tax is that F1 visa holders only have to pay it as long as they have a valid social security number. What this means is that F1 visa holders will only need to get a valid social security number if they have gotten a job on campus, or are applying for an OPT. Additionally, you would need to do it before April 18. That is the deadline for filing your taxes in 2022.
Tax Rates For OPT Students
When it comes to a nonresident alien, the IRS guidelines state that a workplace needs to withhold all federal income tax. Depending on the income levels of the F1 visa holder, they will need to pay an elevated amount of tax at around 10% or 39.6%. The percentage of scholarships awarded to F1 and J1 students is also taxable at 14%. The following states do not charge a tax on income – Alaska, Wyoming, Florida, Nevada, South Dakota, Texas, and Washington.
OPT Student Tax Exemptions
Being an F1 visa holders, they are exempted from paying the FICA (Social Security and Medicare) taxes. Therefore, until a nonresident alien (F1 holder living in the United States of America for less than 5 years) becomes a resident alien (F1 holder living in the United States of America for more than 5 years), they do not have to pay the Social Security and Medicare taxes. As a nonresident alien, you might also be eligible for tax deductions on the Social Security and Medicare taxes.
You can also claim credits under the following, in case there is a lack of a special OPT exemption:
- Child tax credit
- Child and dependant care tax credit
- Foreign tax credit
- Retirement savings contribution credit
- Credits for other dependants
- Adoption credits
Filing A Tax Return While Working As An OPT
As an F1 visa holder, you will need to file Form 8843 and 1040NR. It also needs to be noted that 1040-NR and form 1040-NR-EZ (no dependents) for F1 visa holders are not in use anymore since the year 2020.
Opt To File Taxes For H1B Visa Holders
After conducting a Substantial Presence test, H1B visa holders also need to pay the social security taxes, especially if they are working or are in an OPT. Usually, H1-B visa holders become dual citizens or residents a couple of years after being in the United States of America. It has been noted that F1 visa holders are exempt from some taxes, such as the FICA. however, right from the get-go, H1B visa holders need to pay the FICA tax. They are also not privy to tax deduction benefits, which are usually applicable to students or scholars.
Conclusion
The bottom line when it comes to F1 visa holders paying taxes when staying in the United States of America is that they are not liable to pay the U.S. Social Security and Medicare taxes. As long as the services F1 visa holders are performed under the exemption of USCIS, they do not have to pay the FICA tax. However, other visa holders such as H1B holders do need to pay the social security tax.
Frequently Asked Questions
- Do OPT students get a tax refund?
The thing with IRS is that it is better to overpay rather than get arrested for tax fraud. Due to this overreporting of income, many F1 visa holders are entitled to a tax return.
2. When does an F1 student need to use a W-9 form?
An F1 vis holder needs to use a W-9 form when they are becoming a resident of the USA for tax benefits.