What Is Fed OASDI/EE Tax and How Does It Work?
Demystify the federal tax on your wages that underpins key social programs. Learn how this essential payroll deduction operates.
Federal Old-Age, Survivors, and Disability Insurance (OASDI) tax is a mandatory federal tax on wages that many individuals encounter on their paychecks. This tax represents a component of the contributions made to the Social Security system. Understanding its function and how it impacts your earnings provides clarity for taxpayers.
Defining OASDI Tax
OASDI stands for Old-Age, Survivors, and Disability Insurance, the federal programs funded by this payroll tax. The “EE” in Fed OASDI/EE Tax indicates the “Employee” portion, paid directly by the worker. This tax supports programs providing financial security to Americans.
These programs offer a safety net through various benefits. They provide retirement benefits to eligible individuals who have contributed throughout their working lives. The tax also funds disability income for those unable to work due to a qualifying disability. Survivor benefits are available to eligible family members, such as spouses and children, of deceased workers. These programs provide income for individuals and families facing old age, disability, or the loss of a primary wage earner.
How OASDI Tax is Calculated
The employee’s OASDI tax is determined by applying a specific rate to their gross wages, up to an annual limit. The current tax rate for the employee’s share of OASDI is 6.2% of their taxable wages.
The “wage base limit” is the maximum amount of an individual’s earnings subject to the OASDI tax in a given year. For earnings in 2025, this wage base limit is $176,100. Wages earned above this annual threshold are not subject to the OASDI tax. For example, an employee earning $200,000 in 2025 would only pay OASDI tax on the first $176,100 of their income, meaning their maximum contribution would be $10,918.20 ($176,100 multiplied by 6.2%).
Contributions and Withholding
Both employees and employers contribute to the OASDI program. Employers generally pay an equal portion, matching the employee’s 6.2% contribution. This means a total of 12.4% of an employee’s wages, up to the wage base limit, is contributed to OASDI.
Employers are responsible for withholding the employee’s OASDI tax directly from their gross wages each pay period. Individuals can typically see this deduction on their pay stubs. It may be labeled as “Social Security,” “SS,” “OASDI,” or sometimes as part of “FICA” (Federal Insurance Contributions Act), which also includes Medicare tax. These withheld funds, along with the employer’s matching contributions, are then remitted to the Internal Revenue Service (IRS).