What Is the OASDI Deduction on My Paycheck?
Understand the OASDI deduction on your paycheck. Get clear insights into its purpose, calculation, and the vital social insurance it funds.
When examining a paycheck, one common deduction that often raises questions is OASDI. This federal program provides financial security for millions of Americans. Understanding what OASDI entails, how it is calculated, and the benefits it supports can clarify this regular payroll withholding.
What OASDI Means
OASDI stands for Old-Age, Survivors, and Disability Insurance. It operates as a federal social insurance program, commonly known as Social Security, providing a safety net for workers and their families. This program aims to replace a portion of income lost due to retirement, severe disability, or death.
The “Old-Age” component provides retirement benefits to eligible workers and their spouses or dependents. “Survivors” insurance offers payments to family members, such as spouses and children, after a covered worker passes away. The “Disability” portion extends financial assistance to workers who become unable to work due to a significant medical condition, along with their eligible family members. These three pillars collectively form the core of the Social Security system.
How Your OASDI Deduction is Calculated
The OASDI deduction appearing on an employee’s paycheck is calculated as a percentage of their gross wages. For 2025, the employee tax rate for OASDI is 6.2% of earnings. This rate is applied to an employee’s taxable income up to a specific annual limit, known as the wage base limit.
For earnings in 2025, the wage base limit for OASDI is $176,100. This means that any income earned above this amount in a calendar year is not subject to the OASDI tax. For instance, an employee earning $5,000 in a bi-weekly pay period would have $310 deducted for OASDI (6.2% of $5,000), assuming they have not yet reached the annual wage base limit. If an individual earns $200,000 in 2025, they will only pay OASDI tax on the first $176,100 of their earnings, resulting in a maximum annual contribution of $10,918.20.
Who Contributes to OASDI
Contributions to the OASDI program come from multiple sources to ensure its funding. Employees directly contribute a portion of their wages through payroll deductions. This 6.2% employee share is automatically withheld from each paycheck up to the annual wage base limit.
Employers also play a significant role, contributing a matching 6.2% for each employee. This means the total OASDI tax rate on an employee’s wages is 12.4%, split evenly between the employee and the employer. Self-employed individuals are responsible for paying both the employee and employer portions, totaling 12.4% of their net self-employment income, also up to the annual wage base limit.
The Benefits Funded by OASDI
The deductions taken from paychecks for OASDI fund various forms of financial support. The primary benefit is Old-Age (retirement) benefits, which offer a steady income stream to eligible workers once they reach retirement age. These payments are also extended to their spouses and dependents.
Survivors benefits provide financial aid to eligible family members of a deceased worker. This includes spouses, children, and sometimes dependent parents. Disability benefits are also funded by OASDI, providing regular payments to workers who meet strict criteria for a severe medical condition that prevents them from engaging in substantial gainful activity. These benefits can also extend to their eligible family members.