What Are OASDI Deductions and How Do They Work?

One of the most common deductions on a pay stub is for OASDI, which stands for Old-Age, Survivors, and Disability Insurance. This is the official name for the Social Security tax withheld from an employee’s paycheck, as mandated by the Federal Insurance Contributions Act (FICA). These funds are collected by the Internal Revenue Service (IRS) and managed by the Social Security Administration. The purpose of the OASDI program is to provide a financial safety net by funding benefits for current retirees, individuals with disabilities, and the surviving family members of deceased workers.

Calculating the Employee OASDI Tax

The OASDI tax is calculated using a fixed tax rate and an annual earnings limit. For 2025, the employee tax rate is 6.2% on gross wages. Employers are also required to pay a matching 6.2% on behalf of the employee, but this amount is not deducted from their pay.

A feature of the OASDI tax is the annual wage base limit, which is adjusted for inflation. For 2025, this limit is $176,100. Once an employee’s earnings exceed this amount, the tax is no longer withheld for the rest of the year. The maximum an employee will contribute in 2025 is $10,918.20 ($176,100 x 6.2%).

For example, an employee earning $80,000 per year will have the 6.2% tax applied to all their earnings, resulting in an annual deduction of $4,960. An employee earning $200,000 will only pay the tax on the first $176,100 of their income, reaching the maximum contribution partway through the year.

Distinguishing OASDI from Medicare Tax

The OASDI deduction is seen alongside the Medicare tax on a pay stub, and together they make up the total FICA tax. The Medicare tax rate is 1.45% for employees, and employers must contribute a matching 1.45%. A primary distinction between the two taxes is the wage limit. Unlike the OASDI tax with its annual cap, the Medicare tax has no wage base limit and is applied to all of an employee’s covered wages.

Another element is the Additional Medicare Tax, an extra 0.9% tax applied to earnings above certain thresholds. These thresholds are:

• $200,000 for single filers
• $250,000 for married couples filing jointly
• $125,000 for married individuals filing separately

Employers begin withholding this additional tax once an employee’s wages exceed $200,000 in a calendar year, regardless of their filing status. There is no employer match for the Additional Medicare Tax; it is paid only by the employee.

OASDI for Self-Employed Individuals

The rules for OASDI contributions are different for self-employed individuals, like independent contractors, who pay Self-Employment (SECA) tax instead of FICA. The SECA tax combines the obligations of both the employee and employer into a single payment. The SECA tax rate for the OASDI component is 12.4%, as it covers both the employee and employer portions. The same annual wage base limit that applies to employees also applies to self-employment earnings, meaning a self-employed individual will pay the 12.4% tax only on their net earnings up to that limit.

A provision for self-employed individuals is an income tax deduction for a portion of their SECA taxes. To account for the employer’s share, they can deduct one-half of their total SECA tax paid when calculating their adjusted gross income (AGI). This deduction is available regardless of whether they itemize deductions and effectively lowers their overall income tax liability. This adjustment is meant to create parity with employees, who do not pay income tax on the matching FICA contributions made by their employers.