The One Big Beautiful Bill and J-1 Visa Holders

A New Tax Law That Changes the Rules

On July 4, 2025, the U.S. government signed into law the One Big Beautiful Bill (OBBBA). While most headlines focus on defense spending and social programs, the bill also brings important tax changes for nonresident taxpayers, especially J-1 visa holders who come to the U.S. for work and study programs.

The Tax Moves Blog

Aug 20, 2025 | J1 VISA, Learning IRS

U.S. Capitol building in Washington D.C., symbolizing federal legislation and the One Big Beautiful Bill Act affecting international students and J-1 visa holders

Income Exclusions – A Relief for Workers

The One Big Beautiful Bill (OBBBA) introduces specific exclusions that directly benefit certain types of earnings for J-1 visa holders and other nonresident workers, provided they have a valid Social Security Number (SSN). These exclusions are designed to reduce the taxable income for individuals whose earnings may otherwise be modest or seasonal.

Tip Income

Under the new law, tips received by employees are tax-free up to $25,000 per year. This is particularly relevant for J-1 students or exchange visitors working in hospitality, restaurants, or service industries, where tipping forms a substantial part of income.

💡 Example: Maria, a J-1 student working as a server in a New York restaurant, earns $6,000 in tips over the summer. Thanks to the OBBBA, none of this tip income is subject to federal tax, effectively increasing her take-home pay and reducing her overall tax liability.

Overtime Pay

In addition, overtime earnings up to $12,500 annually are exempt from federal taxes. This applies to students or temporary workers who take on extra shifts beyond their standard schedule.

💡 Example: John, a J-1 research intern, works extra hours during peak project periods and earns $4,000 in overtime. This amount is now excluded from taxable income, lowering his overall tax burden and providing extra financial flexibility.

Why This Matters for J-1 Visa Holders

For J-1 participants, income is often limited and highly regulated, and every dollar matters. By excluding tips and overtime from taxation within the specified limits, the OBBBA ensures that short-term work programs and seasonal jobs remain financially viable. This is not only a benefit for students but also encourages compliance, as workers can report their actual income without facing unexpected tax liabilities.

The New 1% Tax on Money Transfers Abroad?

The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, introduces a 1% excise tax on remittance transfers made after December 31, 2025. This tax applies to most international money transfers unless the provider has an agreement with the U.S. Treasury. The tax is calculated based on the amount of the transfer, not the service provider’s fees. The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, introduces a 1% excise tax on remittance transfers made after December 31, 2025. This tax applies to most international money transfers unless the provider has an agreement with the U.S. Treasury. The tax is calculated based on the amount of the transfer, not the service provider’s fees.

For many J-1 visa holders, sending money back home is part of their exchange program experience. With the introduction of this tax, the cost of sending money abroad has increased.

💡 Example: A student who transfers $400 monthly to their family will now pay an additional $4 per month, or $48 per year, in remittance taxes.

Updated Filing Thresholds – What You Need to Know

The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, introduces significant changes to reporting thresholds that impact international students and seasonal workers:

1099-K Threshold Reverts to $20,000 and 200+ Transactions

Under Section 70432 of the OBBBA, the reporting threshold for Form 1099-K returns to $20,000 in total payments and more than 200 transactions. This change reverses the lower thresholds set by the American Rescue Plan Act of 2021, which had reduced the reporting threshold to $600

This means that small personal transfers are safe from reporting, but larger side earnings may trigger a tax form.

💡 Example: A J-1 student selling personal items online for $1,000 will not receive a tax form, but if they cross $20,000 in transactions, they could.

Backup Withholding Threshold Rises to $2,000

young women reviewing J-1 visa tax documents on a laptop, using J1 Go Tax for accurate filing and guidance

The OBBBA also increases the backup withholding threshold to $2,000, which reduces the chances of having taxes withheld unexpectedly on small payments. Arnold & Porter

Healthcare and Visa Pathways

The One Big Beautiful Bill Act (OBBBA), enacted as Public Law 119-21 on July 4, 2025, introduces significant changes to healthcare access for immigrants, including J-1 visa holders.

Medicaid Eligibility Changes

Starting October 1, 2026, the OBBBA imposes stricter eligibility criteria for Medicaid, affecting lawfully present immigrants:HIAS

Work Requirements:

Adults aged 19–64 without dependents must complete at least 80 hours per month of work, education, or community service to maintain Medicaid coverage.
Exemptions include pregnant individuals, former foster youth under age 26, tribal members, people with serious health issues (including substance use disorders), and those recently incarcerated.

Verification and Documentation:

States are required to verify compliance with these requirements before approving or renewing Medicaid coverage.HANYS

These changes could impact J-1 visa holders if they adjust their status to a Medicaid-eligible category in the future.