What Is Federal OAS Tax and How Does It Work?
Discover Federal OAS Tax, the foundational payroll contribution for Old-Age and Survivors Social Security benefits. Understand its mechanics.
Federal OAS Tax, formally known as Old-Age and Survivors Insurance (OASI) tax, is a mandatory federal payroll tax. It is a fundamental component of the broader Social Security system in the United States. Its primary purpose is to fund specific benefits for American workers and their families.
Defining Old-Age and Survivors Tax
The “OAS Tax” refers to the Old-Age and Survivors Insurance (OASI) portion of the Federal Insurance Contributions Act (FICA) tax for employees and employers. For self-employed individuals, it is part of the Self-Employment Contributions Act (SECA) tax. While FICA and SECA taxes also include Medicare tax, the OASI component is distinct and separately accounted for. Its purpose is to provide financial support to retirees through Old-Age benefits and to the families of deceased workers through Survivors benefits.
A key feature of the OASI tax is the “wage base limit,” meaning earnings above this limit are not subject to the tax. For 2025, this limit is $176,100. This annual limit changes each year based on changes in the national average wage index.
Calculating and Paying the Tax
The Old-Age and Survivors tax is calculated based on specific rates and collected through different mechanisms depending on employment status. For employees, the OASI tax rate is 6.2% of their gross wages, automatically withheld from their paychecks by their employer.
Employers are also responsible for a matching contribution, paying an additional 6.2% OASI tax for each employee. This means the combined OASI tax rate is 12.4% on an employee’s wages, split evenly between the employee and the employer. For self-employed individuals, the combined OASI tax rate is 12.4% of their net earnings from self-employment. Self-employed individuals pay this tax through estimated tax payments throughout the year and report it on Schedule SE. They are allowed to deduct one-half of their self-employment taxes paid when calculating their adjusted gross income.
The wage base limit of $176,100 for 2025 plays a direct role in the calculation for all parties. Earnings exceeding this amount are not subject to the OASI portion of the tax. For example, an employee earning $200,000 in 2025 would only pay OASI tax on the first $176,100 of their income. This tax information, including amounts withheld, appears on an employee’s W-2 form, while self-employed individuals report it on Schedule SE.
Link to Social Security Benefits
Contributions to the OASI system directly link to an individual’s eligibility for future Social Security benefits. By working and paying OASI taxes, individuals earn “work credits,” also known as quarters of coverage. These credits are essential for determining eligibility for various types of Social Security benefits.
In 2025, one work credit is earned for every $1,810 in covered earnings, and an individual can earn a maximum of four credits per year by earning $7,240. Generally, 40 work credits, which equates to about 10 years of work, are required to qualify for Old-Age (retirement) benefits. These credits do not have to be earned consecutively.
Beyond retirement, these contributions also provide protection for a worker’s family. A sufficient number of work credits can qualify a worker’s spouse, children, or other eligible family members for Survivors benefits in the event of the worker’s death.