Is OASDI the Same as Social Security Tax?
Demystify the relationship between OASDI and Social Security tax. Learn how this essential payroll deduction works and what it funds.
Old-Age, Survivors, and Disability Insurance, commonly known as OASDI, represents the core component of what is widely recognized as Social Security tax. This federal program provides financial protection to millions of Americans. It functions as a social insurance system, offering benefits to individuals and their families when certain life events impact their ability to earn income.
Understanding the Components
OASDI is an acronym for three distinct types of benefits. “Old-Age” refers to retirement benefits, supporting individuals in their later years after they have ceased working. “Survivors” benefits are paid to eligible family members, such as spouses or children, after a worker’s death.
“Disability Insurance” provides financial assistance to workers who become severely disabled and are unable to perform substantial work. To qualify, a medical condition must prevent an individual from working and be expected to last for at least one year or result in death.
How OASDI is Taxed
OASDI is funded by payroll taxes collected from both employees and employers. For the tax year 2025, the OASDI tax rate is 6.2% for employees and a matching 6.2% for employers, totaling 12.4% on wages. This tax is mandated under the Federal Insurance Contributions Act (FICA).
The Social Security wage base limit is the maximum amount of earnings subject to OASDI tax. For 2025, this limit is $176,100, meaning any earnings above this threshold are not taxed. This limit is adjusted annually based on changes in the national average wage index.
Self-employed individuals pay both the employee and employer portions of OASDI tax, totaling 12.4% on their net earnings from self-employment. They can deduct one-half of their self-employment taxes on their annual income tax returns, which helps equalize the tax burden compared to traditional employees.
On pay stubs, the OASDI tax often appears under various labels, such as “FICA,” “Social Security,” “SS tax,” or “OASDI.” These mandatory deductions are withheld automatically from gross wages. Employers are responsible for calculating and remitting these amounts to the Internal Revenue Service (IRS).
Purpose of OASDI Funds
OASDI taxes fund Old-Age, Survivors, and Disability Insurance benefits. These funds are held in dedicated trust funds, separate from the general federal budget. There are two primary trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund.
These trust funds invest surplus payroll tax revenues in federal government securities. The income from these investments, along with ongoing tax contributions, ensures continuous payment of current and future benefits to eligible retirees, survivors, and individuals with disabilities. This structure ensures funds directly support beneficiaries, separate from other government programs like Medicare.