What Is OASDI on a Paycheck and Who Pays for It?
Understand the OASDI deduction on your paycheck. Discover its purpose and how contributions are made.
A common deduction on many paychecks is labeled “OASDI.” This acronym represents a fundamental component of the federal social insurance system that provides financial protection to millions. Understanding what OASDI signifies and how it impacts your earnings can clarify this payroll line item.
Understanding Old-Age, Survivors, and Disability Insurance
Old-Age, Survivors, and Disability Insurance (OASDI) is the official designation for what is widely recognized as Social Security. This federal program is funded through a mandatory payroll tax. Its core mission involves providing a financial safety net for eligible individuals and their families by partially replacing income lost due to retirement, long-term disability, or the death of a working family member.
The “Old-Age” component provides retirement benefits to qualified workers who have reached a certain age and accumulated sufficient work credits. “Survivors” benefits offer financial support to the spouses, children, or dependent parents of deceased workers who contributed to the system. The “Disability Insurance” aspect provides income to workers and their families if the worker becomes severely disabled and unable to perform substantial work.
How OASDI Appears on Your Paycheck
The OASDI deduction on an employee’s paycheck represents their portion of the required contribution to this federal program. For employees, the tax rate for OASDI is 6.2% of their gross wages. This rate is established under Internal Revenue Code (IRC) Section 3101. The amount withheld is automatically deducted from each pay period.
There is an annual limit on the amount of earnings subject to OASDI tax, known as the wage base limit. For 2025, this limit is $176,100, meaning any wages earned above this threshold are not subject to the OASDI tax. The calculation for an employee’s OASDI deduction involves multiplying their taxable wages, up to this annual limit, by the 6.2% tax rate. This wage base definition is specified in IRC Section 3121.
Who Contributes to OASDI
Contributions to the OASDI program are mandatory and come from multiple sources. Employees pay their share directly through payroll deductions, as seen on their pay stubs.
Employers also play a significant role by contributing a matching share for each employee. The employer’s portion is also 6.2% of the employee’s gross wages, up to the annual wage base limit, as stipulated by IRC Section 3111.
Self-employed individuals are responsible for paying both the employee and employer portions of the OASDI tax. Their total contribution rate for OASDI is 12.4% of their net earnings from self-employment, governed by the Self-Employment Contributions Act (SECA) tax, IRC Section 1401.