COVID-19 Remote Learning Extends FICA Tax Exemption for F-1 OPT Workers into 2025

A significant, unintended consequence of the COVID-19 pandemic's remote learning policies has extended the FICA tax exemption for a substantial number of foreign graduates working in the U.S. on Optional Practical Training (OPT). This extension, identified by social media user Ben B@dejo, means that employers of these graduates are avoiding Social Security and Medicare contributions for an additional year, potentially through the end of 2025, creating a financial advantage over hiring American peers. The FICA exemption typically applies to F-1 visa holders for their first five calendar years of physical presence in the U.S.

The core of the issue lies in the definition of "physical presence" for tax purposes. As Ben B@dejo explained, "For the first five calendar years of any physical presence in the U.S. on an F-1 visa, they and their U.S. employers don't pay FICA (social security / medicare) tax. They are exempt from it." Students who began their U.S. university programs in Fall 2020 but studied remotely from their home countries during the 2020-2021 academic year did not accrue physical presence in the U.S. for those periods.

This remote study period effectively pushed back the start of their five-year FICA exemption clock. Consequently, while these students graduated in 2024, their FICA exemption, which would normally have expired by the end of 2024, now extends through all of 2025. This provides their employers with a continued tax saving, as stated in the tweet, "Their employers are getting FICA avoidance/savings for an additional six months to a year."

The Optional Practical Training (OPT) program allows F-1 students to work in their field of study for 12 months post-graduation, with STEM (Science, Technology, Engineering, and Mathematics) graduates eligible for a 24-month extension, totaling three years. During this period, if within their five-year exemption window, both the student and employer are exempt from FICA taxes. This exemption, amounting to 6.2% for Social Security and 1.45% for Medicare from both employee and employer, makes foreign graduates financially attractive.

The tweet highlighted the scale of this impact, noting, "There were 200,000 foreigners in the U.S. working on OPT in 2024." This large number signifies substantial FICA savings for employers and a corresponding loss of contributions to U.S. government funds. The situation has intensified the debate around the OPT program and its implications for the American workforce, with some lawmakers proposing an end to the FICA exemption for OPT participants through legislation like the "Dignity Act."