FICA Tax Exemptions
All wage income received in the USA is subject to three main types of tax: (1) federal income tax; (2) Social Security tax; and (3) Medicare tax. Social Security taxes and Medicare taxes are collectively called "FICA taxes." Persons in F-1 and J-1 nonimmigrant status are exempt from FICA payments for a certain period of time, as discussed below.
General Student FICA Exemption:
FICA taxes do not apply to payments received by students employed by a school, college, or university where the student is pursuing a course of study. An examination of the student’s primary relationship with Vanderbilt University will be made in order to determine if employment or education is predominant in the relationship.
International Student & Scholar FICA Exemption:
International students, scholars, professors, teachers, trainees, researchers, physicians, au pairs, summer camp workers, and other aliens temporarily present in the United States in F-1,J-1,M-1, or Q-1/Q-2 nonimmigrant status are exempt from FICA taxes on wages as long as such services are allowed by USCIS.
Exempt Employment includes the following:
- On-campus student employment up to 20 hours a week (40 hrs during summer vacations)
- Off-campus student employment allowed by USCIS.
- Practical Training student employment on or off campus.
- Employment as professor, teacher or researcher.
- Employment as a physician, au pair, or summer camp worker
J-1 Scholars, Teachers, Researchers, Trainees and Physicians and other non-students in J-1 status are considered NRA-TP and exempt from FICA taxes for the first two calendar years of their presence in the USA. After the two calendar year period, they become RA-TP and subject to FICA withholding unless they depart the USA in less than 183 days.
Limitations on FICA Exemption for International Persons :
The FICA exemption does not apply to spouses and children in F-2, J-2, M-2, or Q-3 nonimmigrant status.
- The exemption does not apply to employment not allowed by USCIS or to employment not closely connected to the purpose for which the visa was issued.
- The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 nonimmigrants who change to an immigration status which is not exempt or to a special protected status.
- The exemption does not apply to F-1, J-1, M-1, or Q-1/Q-2 nonimmigrants who become resident aliens.
- The FICA exemption only applies to international persons in F-1, J-1, M-1, Q-1, or Q-2 visas and who are still classified as nonresident aliens for tax purposes under US tax regulations.
- International students in F-1, J-1, M-1, Q-1 or Q-2 nonimmigrant status are entitled to the FICA exemption for the first 5 calendar years of physical presence in the USA. After this period of time has passed, international students are classified as Resident Aliens for Tax Purposes and are subject to FICA tax withholding. . However, if they remain students (primarily) they may be able to claim the Student FICA exemption (see above).
- The five year exemption permitted to F-1, J-1, M-1, Q-1 or Q-2 students also applies to any period in which the international student is in "practical training" allowed by USCIS, as long as the foreign student is still classified as a nonresident alien for tax purposes.
- International scholars, teachers, researchers, trainees, physicians, au pairs, summer camp workers, and other non-students in J-1, Q-1 or Q-2 nonimmigrant status who have been in the United States less than two calendar years are classified as nonresident aliens for tax purposes and are exempt from FICA taxes for that two year period of time. However, once the two calendar years have passed, this group of international persons is classified as resident aliens for tax purposes and is subject to FICA tax withholding.
- Spouses and dependents of alien students, scholars, trainees, teachers, or researchers temporarily present in the United States in F-2, J-2, or M-2 status are NOT exempt from social security and Medicare taxes, and are fully liable for social security/Medicare taxes on any wages they earn in the United States.
- International persons in H-1B, TN, O-1 or E-3 status are fully subject to FICA tax withholding. No FICA exemption is available to persons in these visa categories.
“Six Year Look-Back” Rule:
Under the “6 year look-back rule” persons in F, J, M or Q visa status must have at least two calendar years of NRA-TP status during the prior 6 calendar year period from the current year. Internationals who remain in the USA for lengthy periods of time will find that they have moved from NRA-TP to RA-TP and then back to NRA-TP. Moving back to NRA-TP means classification as “single with 1 allowance” for tax purposes regardless of number of dependents or marital status.
Measuring A Calendar Year:
When measuring an alien’s date of entry for the purposes of determining the five calendar years or the two calendar years mentioned above, the actual date of entry is not important. It is the calendar year of entry which is counted toward the two or five calendar years respectively. For example, a foreign student who enters the United States on December 31, 1998 counts 1998 as the first of his five years as an "exempt individual."