What Is the OASDI Tax and How Is It Calculated?
Understand the OASDI tax: its essential purpose as a U.S. payroll deduction and how its mechanics operate.
The Old-Age, Survivors, and Disability Insurance (OASDI) tax represents a fundamental part of the U.S. Social Security system. It is a mandatory payroll tax levied on wages earned by most American workers. The primary purpose of this tax is to fund benefits that provide financial security to millions of individuals. These contributions support current retirees, those with qualifying disabilities, and the families of deceased workers.
Understanding OASDI Components
The acronym OASDI breaks down into three distinct components, each representing a specific type of social insurance provided through the Social Security program. “Old-Age Insurance” refers to retirement benefits, offering income support to eligible individuals when they reach their full retirement age. This component forms the largest part of the Social Security program.
“Survivors Insurance” provides financial protection to eligible family members of a worker who has passed away. These beneficiaries can include spouses, children, and dependent parents, receiving income that helps replace the deceased worker’s earnings.
“Disability Insurance” offers income benefits to workers who become severely disabled and are unable to engage in substantial gainful activity due to their condition. To qualify for these benefits, individuals must meet specific medical and work history criteria. The OASDI tax funds these three pillars.
Calculating and Paying OASDI Tax
The OASDI tax rate is 6.2% for employees and an additional 6.2% for employers, totaling 12.4% of an employee’s taxable wages. The Social Security Administration (SSA) establishes an annual wage base limit, the maximum earnings subject to the tax. For 2025, this wage base limit is $176,100, meaning any earnings above this threshold are not subject to the OASDI tax.
For example, an individual earning $200,000 in 2025 would only pay OASDI tax on the first $176,100 of their wages, not the full $200,000. The maximum OASDI tax an employee or employer would pay in 2025 is $10,918.20 (6.2% of $176,100). Self-employed individuals pay both the employee and employer portions of the OASDI tax, a total of 12.4% of their net self-employment income, up to the annual wage base limit. This is paid as part of the Self-Employment Contributions Act (SECA) tax. However, self-employed individuals can deduct one-half of their SECA tax from their gross income when calculating their adjusted gross income for federal income tax purposes.
How OASDI Tax is Collected
For most employees, the OASDI tax is collected through payroll deductions. Employers withhold the employee’s 6.2% share from their gross pay. The employer then remits both the withheld employee portion and their own matching 6.2% contribution to the Internal Revenue Service (IRS).
Employees can review the total amount of OASDI taxes withheld from their wages on their annual Form W-2, Wage and Tax Statement, provided by their employer. For self-employed individuals, the collection method differs as they do not have an employer to withhold taxes. Instead, they typically pay their estimated SECA tax, which includes the OASDI portion, throughout the year in quarterly installments.