Your First US Paycheck Decoded: Federal Withholding, FICA, and State Taxes for International Employees

Your first US paycheck will be smaller than your offer letter suggested — here is exactly why, line by line, and what you can do about it.

You accepted an offer for $95,000 a year. Simple math says that's roughly $7,900 a month. Your first paycheck arrives and it shows $5,400. The difference — over $2,500 — went somewhere, and nobody at onboarding explained exactly where.

This is almost universal for international employees on F-1 OPT, STEM OPT, or H-1B. US payroll is a stack of overlapping taxes and deductions, and each layer has different rules for non-resident aliens. Some deductions you owe and cannot avoid. Others you may be exempt from entirely, and if you don't claim that exemption, your employer will withhold anyway. Getting this wrong in your first year means either a surprise tax bill in April or an interest-free loan to the IRS — neither is what you want.

This guide breaks down every line on a US pay stub, explains which rules apply specifically to international workers, and tells you what forms to file and when.

What a US pay stub actually shows

Your pay stub is divided into three zones: gross pay, deductions, and net pay. Gross pay is what your employer owes you before anything is removed. Net pay is what hits your bank account. The gap between them is every deduction line added together.

Deductions fall into two buckets: taxes (withheld and remitted to government agencies) and benefit contributions (withheld and remitted to insurance carriers, retirement accounts, or flexible spending accounts). Both reduce your take-home pay, but they behave differently for tax purposes.

Understanding which bucket each line belongs to matters because pre-tax deductions reduce the amount subject to federal income tax, while post-tax deductions do not.

Federal income tax withholding — and the W-4 problem for international workers

Federal income tax is withheld based on your Form W-4. For US citizens, this is simple: you fill in your filing status, dependents, and any additional withholding. For non-resident aliens (NRA), there are additional constraints spelled out in IRS Publication 515 and Notice 2005-76.

The critical rules for NRA W-4 completion:

1. You cannot claim the standard deduction. Most international workers on F-1, OPT, or H-1B are NRAs for tax purposes for their first several years, so the standard deduction ($15,000 for 2026 for US residents) does not reduce your taxable income.
2. You cannot claim more than one allowance on a legacy W-4 form if you are NRA.
3. You must write "Non-Resident Alien" in Step 4(c) (or on a separate attachment) to trigger the IRS's NRA withholding tables.
4. You must add an additional flat dollar amount from the IRS NRA withholding table (the 2026 amount is $13,900 annualized, added to your wages for withholding calculation purposes).

Many HR systems do not prompt international employees through this correctly. If your employer processed your W-4 as if you were a resident, your withholding may be too low, and you will owe a balance in April — possibly with an underpayment penalty.

Action step: Within your first two weeks, confirm with HR or payroll that your W-4 reflects your NRA status. If it does not, submit a corrected W-4 immediately.

For a full breakdown of treaty benefits and the mechanics of the Substantial Presence Test, see our tax guide for international students covering FICA and treaty details.

FICA — the rule that directly benefits many international workers

FICA stands for Federal Insurance Contributions Act. It funds two programs:

• Social Security (OASDI): 6.2% of wages up to the annual wage base ($176,100 in 2026)
• Medicare: 1.45% of all wages (plus an additional 0.9% on wages above $200,000)

Your employer pays a matching amount on top of what is withheld from your paycheck. Together, employee plus employer, it is 15.3% of your wages going to Social Security and Medicare.

Here is the critical fact for F-1 and OPT workers: Under Internal Revenue Code Section 3121(b)(19), nonresident alien students, scholars, teachers, and researchers present in the US under F, J, M, or Q visa categories are exempt from FICA as long as they remain nonresident aliens for tax purposes.

This is not automatic. You must notify your employer. The standard approach is a written statement to payroll — something as simple as: "I am an F-1 nonresident alien student and am exempt from Social Security and Medicare tax withholding under IRC 3121(b)(19) and Rev. Proc. 2005-49."

If your employer withholds FICA anyway, you can claim a refund on your tax return. But it is easier to prevent the withholding than to claw it back.

When does FICA exemption end? When you become a resident alien for tax purposes. This is determined by the Substantial Presence Test: if you are physically present in the US for 183 or more days in a given year (using the weighted formula: all days this year + 1/3 of days last year + 1/6 of days two years ago), you cross into resident alien status. For most F-1 students who arrived as undergraduates and stayed through OPT, this happens in the 6th or 7th calendar year of US presence.

H-1B workers: H-1B is not in the exempted visa categories under 3121(b)(19). If you are an H-1B worker who is a nonresident alien for tax purposes (common in your first couple of years on H-1B), you still owe FICA. Once you become a resident alien for tax purposes, FICA is clearly owed.

State income tax withholding

This varies dramatically by state. Nine states have no state income tax on wages as of 2026: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. If your job is in one of these states, the "State Tax" line on your stub will be zero.

For states that do have income tax, the withholding rates and exemption rules for NRAs vary. California, for example, does not honor the same treaty exemptions federally available, and its top marginal rate is 13.3% on wages above certain thresholds. New York City adds a city income tax on top of New York State withholding.

Practically speaking, if you are relocating for a new job, factoring in state tax can materially change your real take-home pay. A $110,000 offer in Seattle (no state income tax) may net you more than a $120,000 offer in San Francisco after California state and city taxes.

For a deeper look at how state tax affects relocation decisions, see our piece on no-tax-state relocation strategy for H-1B holders.

Benefit deductions — where the rest of the gap hides

Beyond taxes, the other major source of paycheck shock is benefit deductions. These are amounts your employer removes from your paycheck and remits to insurance companies, retirement administrators, or spending account custodians.

Health insurance premiums: Your employer likely covers a substantial portion of the premium, but the employee share is still withheld from your pay. For employer-sponsored plans, employee premiums are usually deducted pre-tax under a Section 125 cafeteria plan. A single-person plan may cost you $100-$300 per pay period; a family plan can exceed $600.

401(k) or 403(b) contributions: If you elected to contribute to your employer's retirement plan, that amount comes out of each paycheck. Traditional 401(k) contributions are pre-tax, reducing your taxable income. Roth 401(k) contributions are post-tax. The 2026 IRS contribution limit for employee 401(k) deferrals is $23,500. For a full overview of how these accounts work as an international employee — including what happens if you leave the US — see our guide on understanding US benefits including 401(k) and health insurance.

Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA): FSA contributions are pre-tax payroll deductions for medical or dependent care expenses. HSA contributions are pre-tax if contributed via payroll. Note that HSA eligibility requires enrollment in a High Deductible Health Plan (HDHP) — if your plan is not an HDHP, HSA contributions are not available.

Other common deductions: Dental, vision, supplemental life insurance, short-term disability, commuter benefits (transit or parking), and employee stock purchase plan (ESPP) contributions. ESPP deductions are post-tax.

Understanding your effective vs. marginal tax rate

One of the most common misconceptions among new employees: learning their tax bracket and assuming every dollar is taxed at that rate. The US federal income tax system is marginal — each bracket rate applies only to income within that bracket's range.

2026 federal income tax brackets (single filer, resident alien, approximate):

A single NRA earning $95,000 in gross wages, with no pre-tax deductions, owes roughly $16,000-$18,000 in federal income tax — an effective rate around 17-19%, not 22% (their marginal rate). The 22% bracket rate applies only to the dollars that fall in that range.

For NRAs: Because you cannot claim the standard deduction (unlike US residents who deduct $15,000 in 2026), your taxable income is higher than a comparable US citizen's, and your effective rate is slightly higher as a result.

Step-by-step: reading your first pay stub

Follow these steps when your first paycheck arrives:

1. Find your gross pay. This should match your salary divided by pay periods (26 for biweekly, 24 for semi-monthly, 12 for monthly).
2. Identify all tax lines. Separate federal income tax, Social Security, Medicare, and state/local taxes.
3. Verify FICA status. If you are on F-1 or OPT and Social Security and Medicare are being withheld, flag this with HR immediately and submit your exemption statement.
4. Add up benefit deductions. Total health, dental, vision, retirement, and other benefit lines. Compare to what you elected in benefits enrollment.
5. Check for auto-enrollment. Some employers auto-enroll new hires in a 401(k) at 3-6% of salary. If you did not explicitly elect a contribution rate, confirm whether auto-enrollment applied.
6. Calculate your effective deduction rate. (Gross pay − Net pay) / Gross pay. If it is above 35% and you are on OPT, check for incorrect FICA withholding.
7. Keep every pay stub. You need them for your tax return, for LCA wage compliance verification if you are H-1B, and for mortgage or credit applications.

How pay frequency affects your withholding math

US employers use different pay schedules. Your W-4 withholding is annualized by payroll software — it divides your annual estimated income by the number of pay periods, applies the tax tables, and calculates per-period withholding. This means:

• If you start mid-year, the withholding calculation may overestimate your annual income (because it projects a full-year salary), potentially over-withholding federal tax. You will get a refund.
• If you have multiple jobs or significant non-wage income (RSUs vesting, freelance work), each paycheck may under-withhold because each employer only sees their portion of your wages.

For RSU vesting specifically, see our guide on tech compensation for new grads including equity and RSU mechanics.

Common mistakes international employees make

Not claiming FICA exemption on OPT. This is the most expensive mistake. Social Security and Medicare add up to 7.65% of gross wages. On a $90,000 salary that is $6,885 per year incorrectly withheld. You can reclaim it on your tax return, but the refund process takes months.

Completing the W-4 as a resident. If you check the wrong boxes or your payroll system does not capture your NRA status, your withholding will be too low (because the system assumed the standard deduction). You will owe taxes in April.

Ignoring 401(k) auto-enrollment. Many employers automatically enroll new hires. If you did not intend to contribute, or if you plan to leave the US in the near term, review your elections. Early withdrawal from a 401(k) before age 59½ triggers a 10% penalty plus ordinary income tax — relevant if you return home before retirement.

Assuming no state tax means no state withholding forms. Even in no-income-tax states, some employers withhold for state disability insurance (SDI) or paid family leave (PFL). California and New York SDI appear as separate lines.

Not verifying your withholding mid-year after a status change. When you transition from OPT to H-1B, your FICA status changes. When you cross the Substantial Presence Test threshold, your tax residency changes. Each transition should prompt a conversation with HR and payroll.

Overlooking the Additional Medicare Tax. If your wages exceed $200,000, an additional 0.9% Medicare tax applies to the excess. Employers are required to withhold this once they pay you more than $200,000, regardless of your filing status. If the combined income from multiple employers causes you to owe this tax, you settle it at filing time.

Frequently asked questions

Do F-1 OPT students pay FICA (Social Security and Medicare) taxes?

No — F-1 students and OPT workers in their first five calendar years in the US are classified as non-resident aliens for tax purposes and are exempt from FICA withholding under IRC Section 3121(b)(19). Once you become a resident alien for tax purposes (generally after crossing the Substantial Presence Test threshold), FICA applies. Notify your payroll department with a written exemption claim; do not wait for them to ask.

What should I put on Form W-4 as an international employee on OPT or H-1B?

Non-resident aliens must follow IRS Publication 515 instructions for W-4 completion. You cannot claim the standard deduction or more than one allowance. Write "Non-Resident Alien" in Step 4(c) or attach a note, and add an additional withholding amount per the IRS Non-Resident Alien Withholding Table. Most tax advisors recommend getting this right from day one because under-withholding accumulates fast.

Why does so much come out of my paycheck even after accounting for taxes?

Beyond federal and state income tax, your pay stub may show pre-tax benefit deductions (health insurance, 401(k), FSA) that reduce gross pay before taxes are calculated, plus post-tax deductions for voluntary benefits, supplemental life insurance, and employee stock purchase plans. Add up every line on your stub and categorize them — you may find several hundred dollars going to benefits you enrolled in (or were auto-enrolled in) during onboarding.

Can I claim a tax treaty benefit to reduce federal income tax withholding?

Yes, if a tax treaty between your home country and the US covers wages or scholarships. You claim the benefit on Form 8233 (for wages) submitted to your employer before payroll runs. Common treaty countries include China, Germany, France, the UK, Canada, and South Korea. India has no wage treaty exemption for OPT or H-1B workers — the treaty only covers specific student and trainee scenarios. Details on filing Form 8833 at tax time are in our tax treaty and Form 8833 filing guide.

What happens to FICA withholding when I change from F-1 OPT to H-1B?

Once your H-1B status begins (typically October 1 of the lottery year), you are generally considered a non-resident alien for the remainder of that calendar year unless the Substantial Presence Test already makes you a resident. As you accumulate US presence over subsequent years you will cross into resident alien status, at which point full FICA applies. Confirm this proactively with HR rather than waiting for payroll to update automatically.

Getting your payroll setup right in the first pay period is far easier than untangling it in April. Confirm your FICA exemption status, review your W-4 for NRA compliance, and check your benefit elections line by line.

If you want a second set of eyes on your situation — or need help landing a role where the employer handles international payroll correctly from day one — F1Jobs works with international candidates every day on exactly these questions.