What Does OASDI Mean on a Pay Stub?

A pay stub serves as a record of an individual’s earnings and the various deductions taken from their gross pay. Pay stubs often contain acronyms and line items that can be difficult to understand. OASDI is a common, yet often misunderstood, deduction. It represents a significant component of payroll taxes, and understanding its nature is important for any wage earner.

Understanding the OASDI Deduction

The acronym OASDI stands for Old-Age, Survivors, and Disability Insurance. This is the federal Social Security tax, a mandatory payroll tax that employers must withhold from gross wages. It funds a federal insurance program providing financial protection to millions of Americans.

This tax is part of the Federal Insurance Contributions Act (FICA) taxes, which also include Medicare taxes. While Medicare taxes help fund healthcare benefits, OASDI specifically supports the Social Security program. It is deducted from earnings before voluntary deductions like retirement contributions or health insurance premiums.

Calculating Your OASDI Contribution

The OASDI deduction is calculated based on a specific tax rate applied to your taxable wages, up to an annual limit. For 2025, the employee’s portion of the OASDI tax rate is 6.2% of gross wages. Employers also contribute an equal 6.2%, making the total tax rate 12.4% on covered wages.

The “wage base limit,” also known as the taxable maximum, is a key aspect of this calculation. For 2025, this annual limit is $176,100. Wages earned above this amount in a calendar year are not subject to the OASDI tax. For example, if an employee earns $50,000 in 2025, their annual OASDI contribution would be $3,100 ($50,000 x 0.062).

Conversely, if an employee earns $200,000 in 2025, their OASDI contribution would be capped at the wage base limit. They would only pay tax on the first $176,100 of their earnings. Their total OASDI contribution for the year would be $10,918.20 ($176,100 x 0.062).

The Purpose of OASDI Contributions

The funds collected through OASDI contributions are used to finance Social Security benefits. These benefits fall into three main categories, forming a social insurance safety net for eligible individuals and their families. The largest portion of the OASDI tax, approximately 85%, is allocated to a trust fund that provides Old-Age benefits. These benefits offer retirement income to eligible workers who have reached a certain age and accumulated sufficient work credits throughout their careers.

Another component funded by OASDI is Survivors benefits. These benefits provide financial assistance to the families of deceased workers who had contributed to the system. This includes spouses, children, or dependent parents. The remaining portion of the OASDI tax, around 15%, is directed towards a trust fund for Disability benefits. These payments support individuals unable to work due to a severe medical condition that meets federal criteria.