What Is OASDI/EE on My Paycheck?
Demystify a common paycheck deduction. Understand the significance of this federal contribution, how it's determined, and its role in long-term financial support.
The “OASDI/EE” deduction on your paycheck is a mandatory federal payroll tax. Understanding this deduction is important, as it contributes to a significant social insurance program, directly impacting your net pay and future benefits.
Understanding OASDI/EE
OASDI stands for Old-Age, Survivors, and Disability Insurance, the formal name for the federal Social Security program. “EE” indicates the employee’s portion. This tax is part of the Federal Insurance Contributions Act (FICA) tax, which also includes Medicare taxes. Employers withhold FICA taxes from your gross wages.
The Social Security Administration (SSA) administers the OASDI program, which is funded through these payroll taxes. The funds collected through OASDI are pooled into trust funds managed by the SSA.
How Your OASDI/EE Tax is Calculated
The employee’s tax rate for OASDI is 6.2% of your gross wages. There is an annual limit on earnings subject to this tax, known as the “wage base limit” or “taxable maximum.” For 2025, this limit is $176,100. Earnings above this amount in a calendar year are not subject to the OASDI tax.
For example, if you earn $5,000 in a pay period, your OASDI/EE deduction is 6.2% of $5,000, or $310. If your annual earnings reach $180,000 in 2025, you pay OASDI tax only on the first $176,100. Your total OASDI tax for the year would be $176,100 multiplied by 6.2%, equaling $10,918.20. Once your earnings exceed the annual wage base limit, no further OASDI tax is withheld for the remainder of that year.
The Purpose of OASDI Contributions
The funds collected through OASDI contributions finance the Social Security program, which provides financial benefits to millions of Americans. These benefits include retirement income for eligible retired workers and survivor benefits for qualifying family members of workers who have passed away.
OASDI contributions also fund disability benefits for individuals unable to work due to a severe medical condition. The Social Security system operates on a “pay-as-you-go” basis, meaning contributions from current workers and their employers pay benefits to current retirees, survivors, and individuals with disabilities. Any unused money is held in Social Security trust funds to help secure future benefits.
The Employer’s Matching Contribution
Employers are also required to contribute to the OASDI program on behalf of their employees. This is a matching contribution, meaning employers pay an additional 6.2% of each employee’s gross wages towards OASDI. This employer contribution is subject to the same annual wage base limit.
When combined, the employee and employer contributions total 12.4% of an employee’s wages, up to the annual limit. This combined amount collectively funds the entire Social Security system. Employers are responsible for remitting both their matching portion and the amounts withheld from employee paychecks to the U.S. government.