What Are OASDI Taxes and How Are They Calculated?
Decode OASDI taxes. Grasp their role in your earnings, how contributions are determined, and their long-term financial significance.
OASDI taxes are a fundamental part of the U.S. tax system, appearing on most American paychecks. Understanding these deductions is important for taxpayers, as they contribute to programs designed to provide financial security. These taxes represent a regular contribution from earnings, helping to fund benefits that impact millions of individuals and families.
Understanding OASDI Taxes
OASDI stands for Old-Age, Survivors, and Disability Insurance, commonly known as Social Security. These taxes are a component of the Federal Insurance Contributions Act (FICA) taxes, which also include Medicare taxes. While both OASDI and Medicare taxes fall under FICA, they fund distinct programs and have different rules regarding taxable earnings.
The primary purpose of OASDI taxes is to fund Social Security benefits. These benefits include retirement payments for eligible workers, survivor benefits to the families of deceased workers, and disability benefits to individuals who are unable to work due to a severe medical condition.
Who Pays OASDI Taxes
Responsibility for contributing to OASDI is shared among different groups of workers. For most employed individuals, a portion of their gross wages is withheld from their paycheck by their employer. This withheld amount represents the employee’s contribution to the OASDI program.
Employers also pay a matching portion of the OASDI tax on behalf of their employees. For every dollar an employee contributes through payroll deduction, the employer contributes an equal amount. This shared contribution model ensures broad funding for the Social Security system.
Self-employed individuals bear the full responsibility for both the employee and employer portions of the OASDI tax. They pay these contributions through the Self-Employment Contributions Act (SECA) tax. Self-employed individuals are permitted to deduct one-half of their self-employment taxes when calculating their adjusted gross income for income tax purposes.
Calculating OASDI Tax Contributions
The amount of OASDI tax an individual contributes is determined by a specific tax rate applied to their earnings, up to an annual limit. For 2025, the OASDI tax rate is 6.2% for employees, and employers contribute an additional 6.2%. Self-employed individuals pay the combined rate of 12.4% on their net self-employment earnings.
A key aspect of OASDI tax calculation is the Social Security wage base limit, also known as the taxable maximum. For 2025, this limit is $176,100. Earnings up to this amount are subject to OASDI tax, but any income earned above this threshold is not subject to additional OASDI taxation. For example, an employee earning $200,000 in 2025 would pay OASDI tax only on the first $176,100 of their income.
On a pay stub, these taxes are itemized, often appearing as “OASDI,” “Social Security,” or “SS.” They might be grouped under “FICA,” which encompasses both Social Security and Medicare taxes.