Last Updated: April 2026
International students on F-1 visas occupy a special position in the US tax system. Unlike work visa holders (H-1B, L-1, O-1), F-1 students are exempt from the Substantial Presence Test for their first 5 calendar years in the US — meaning they are treated as nonresident aliens regardless of how many days they spend in the country. This nonresident status carries significant tax advantages, including exemption from FICA taxes, simpler worldwide income reporting rules, and eligibility for certain tax treaty benefits.
However, the rules change as students progress through their academic career and into OPT or STEM OPT work authorisation, and change again entirely when they transition to H-1B status. Understanding the 5-year clock, how scholarships and fellowships are taxed, which tax treaties apply to wages and stipends, and what happens in the dual-status year when switching to H-1B is essential for any international student in the US.
F-1 students are classified as 'exempt individuals' under the Substantial Presence Test (SPT) for their first 5 calendar years in the US. Days spent in the US as an F-1 exempt individual are not counted for SPT purposes. This means:
During the exempt nonresident period, F-1 students are taxed only on US-source income — primarily wages from on-campus jobs, internships, or CPT/OPT employment. Foreign-source income (income from a home country bank account, foreign dividends) is generally not taxable in the US during the nonresident period. This is a significant advantage over H-1B workers who must report worldwide income immediately.
While an F-1 student is a nonresident alien under the SPT exemption, they are exempt from FICA (Social Security and Medicare taxes). This is codified in IRC sections 3101, 3111, and 3121(b)(19). The employer should not withhold Social Security (6.2%) or Medicare (1.45%) from a qualifying F-1 student's wages.
Key rules around the FICA exemption:
For a student earning $25,000 per year, the FICA saving is approximately $1,912 per year — significant for students on tight budgets.
Optional Practical Training (OPT) and STEM OPT are work authorisation periods that allow F-1 students to work in the US for 12 months (OPT) or up to 36 months (STEM OPT) after completing their degree. The tax treatment during OPT and STEM OPT depends on whether the student is still a nonresident alien:
A common scenario: a student who started in Fall 2022 completes their degree in May 2026 and begins OPT in June 2026. By 2026, they have used their 5 exempt calendar years (2022-2026). In 2026, the SPT may or may not apply depending on day counts — but in 2027, if they are still on STEM OPT, they will likely be a resident alien.
Some F-1 students on OPT receive a Form 1099-MISC or 1099-NEC rather than a W-2, indicating their employer treats them as an independent contractor. This has tax implications: self-employment tax (15.3%) may apply, and the FICA exemption rules interact differently with self-employment income.
The US has income tax treaties with over 65 countries, and many treaties contain specific provisions benefiting students and trainees. Key treaties for common F-1 nationalities:
| Country | Treaty Article (Students) | Benefit |
|---|---|---|
| India | Article 21 | Stipends and scholarships exempt; up to $8,000 of wages exempt for first 2 years of F-1 |
| China | Article 20 | Scholarships exempt; up to $5,000 of wages exempt for first 5 years |
| Germany | Article 20 | Scholarships and maintenance grants exempt |
| UK | Article 20A | Grants and scholarships exempt; wages up to $9,000 in some cases |
| France | Article 21 | Grants and scholarships exempt |
| South Korea | Article 21 | Grants and wages up to $2,000 exempt |
To claim treaty benefits as an F-1 student, you complete Form 8233 (for wages exempt from withholding) or claim the exemption on Form 1040-NR. Not all states honour federal tax treaty benefits — California, for instance, does not recognise most tax treaty exemptions for state income tax purposes.
The taxability of scholarships and fellowship grants for F-1 students depends on how the money is used:
The university typically withholds 14% federal income tax on taxable scholarships and fellowship income paid to nonresident aliens (unless a treaty exemption applies). F-1 students must file Form 1040-NR to either confirm this is correct or claim a refund if overwitheld. Many F-1 students are entitled to refunds — particularly in their first year when they arrive partway through the year.
The year an F-1 student changes to H-1B status is one of the most complex tax years they will face. Assuming the 5-year F-1 exemption has been used:
One important consideration: in the H-1B year, if the student had FICA-exempt OPT earnings in the first part of the year, the employer should stop withholding FICA from the H-1B start date (not from January 1). Retroactive FICA corrections may be needed if the employer does not adjust correctly at the H-1B start.
The cap-gap extension (the period between the end of OPT and the October 1 H-1B start date) is particularly complex. Students in cap-gap remain F-1/OPT nonresidents during this period, meaning FICA exemption continues until the H-1B is activated.
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools. Learn more about our affiliate partnerships
★ 4.8 Trustpilot · 1,625 reviews
Greenback's CPAs specialise exclusively in US expat returns — FEIE, foreign tax credits, FBAR, exit tax, dual-status returns, and more. Fixed pricing, no surprises.
⚠ Not the cheapest option — best for complex situations and expats who want a dedicated CPA.
Get Your US Expat Taxes Filed →F-1 students are exempt from FICA (Social Security and Medicare taxes) during their first 5 calendar years as an F-1 'exempt individual' — meaning years counted since first arriving in the US in F-1 status. The exemption ends when they leave F-1 status (e.g., transition to H-1B) or when the 5-year exempt period expires and they meet the Substantial Presence Test. If your employer incorrectly withholds FICA, you can claim a refund using Form 843.
F-1 students who are nonresident aliens file Form 1040-NR (US Nonresident Alien Income Tax Return). They do not file the standard Form 1040 used by US citizens and resident aliens. Form 1040-NR reports only US-source income. Many students also need to file Form 8843 (Statement for Exempt Individuals) even if they have no US income, to declare their exempt status for the Substantial Presence Test. Sprintax and similar services specialise in 1040-NR preparation for international students.
No — nonresident aliens cannot claim the standard deduction on Form 1040-NR. This is a significant disadvantage compared to resident aliens and US citizens. F-1 students can only claim itemised deductions that are directly connected to their US-source income. The one major exception is students from India — the US-India tax treaty Article 21 allows Indian F-1 students to claim the standard deduction, making it a notable treaty benefit. Most other nationalities do not have this treaty provision.
OPT income is FICA-exempt as long as the student remains a nonresident alien — i.e., within their 5 calendar years of F-1 exempt status. An F-1 student on their first or second year of OPT who started in the US in 2022 and is now in 2025 or 2026 may still be FICA-exempt depending on their individual year count. However, once the 5-year period ends and the student becomes a resident alien under the Substantial Presence Test, FICA applies in full. OPT students should verify their exempt status each year.
In year 6 (or the first calendar year after the 5-year exempt period expires), the student must apply the Substantial Presence Test to determine their residency status. If they were present in the US for 183+ days (counting current year days + 1/3 prior year + 1/6 the year before), they become a resident alien — triggering Form 1040 filing, worldwide income reporting, FICA liability, and eligibility for the standard deduction. Many F-1 students transition to H-1B status around this time, which automatically makes them resident aliens.
J-1 visa holders (exchange visitors) are treated similarly to F-1 students for US tax purposes — they are also exempt individuals for the Substantial Presence Test. However, J-1 visitors in the 'teacher' or 'researcher' category are exempt for only 2 calendar years (not 5), while J-1 students have the same 5-year exemption as F-1 students. J-1 holders also file Form 1040-NR and are generally FICA-exempt during their exempt period. The specific treaty benefits may differ slightly by nationality and category.
Yes — state income taxes generally apply to F-1 students' US-source wages, just as they do for other workers. The nonresident alien status is a federal concept; states typically tax income earned within their borders regardless of federal residency status. Some states (Texas, Florida, Washington, Nevada, Wyoming, South Dakota, Alaska) have no state income tax. States like California and New York do not honour most federal tax treaty benefits, meaning even treaty-exempt wages may be subject to California or New York state tax.