What Is the OASDI Deduction on My Paycheck?
Understand the OASDI deduction on your paycheck. Gain clarity on this vital payroll contribution and its connection to your future Social Security.
The OASDI deduction on your paycheck represents a portion of your earnings set aside to fund Social Security benefits. This withholding contributes to a federal program providing financial support to millions of Americans. It appears as a line item on your pay stub, reducing your net pay. Understanding this deduction helps you grasp how your contributions support future and current beneficiaries.
Understanding Old-Age, Survivors, and Disability Insurance
The acronym OASDI stands for Old-Age, Survivors, and Disability Insurance, the three core components of Social Security. Old-Age Insurance provides retirement benefits to eligible workers and their spouses. These benefits are determined by a worker’s earnings history and the age at which they claim them.
Survivors Insurance extends financial protection to the families of deceased workers. This can include spouses, children, and dependent parents who meet specific eligibility criteria. It helps alleviate the financial burden that often follows the loss of a primary wage earner.
Disability Insurance offers income support to workers who become unable to perform substantial gainful activity due to a severe medical condition. Their spouses and children may also qualify for benefits. This component serves as a safety net for individuals facing long-term disabilities.
How Your OASDI Deduction is Calculated
The OASDI deduction is part of the Federal Insurance Contributions Act (FICA) tax. FICA taxes fund both Social Security and Medicare programs, shared between employees and employers. Employees typically see a 6.2% deduction from their gross wages for OASDI.
Employers match this 6.2% contribution, bringing the total OASDI tax rate to 12.4% of an employee’s taxable wages. This shared responsibility ensures funding for the Social Security trust funds. The deduction is automatically withheld from each paycheck up to a certain annual limit.
For every dollar you earn, up to that limit, 6.2 cents are withheld for OASDI. This amount is reported on your W-2 form. The consistent rate and automatic withholding make it a predictable payroll deduction.
The Annual Wage Base Limit
An annual wage base limit caps the amount of earnings subject to the OASDI tax. This limit represents the maximum amount of an individual’s gross wages on which the 6.2% OASDI tax is applied. For earnings in 2025, this base is $176,100.
Once an individual’s cumulative earnings reach this limit, no further OASDI tax will be withheld from subsequent paychecks. High-income earners stop contributing to OASDI. The Social Security Administration adjusts this wage base limit annually to account for changes in the national average wage index.