What Is the OASDI Tax and How Is It Calculated?

Old-Age, Survivors, and Disability Insurance (OASDI) is a federal payroll tax that funds the Social Security program. This mandatory tax for most U.S. workers and employers is a component of the Federal Insurance Contributions Act (FICA), which also includes Medicare taxes. OASDI provides financial protection through various benefits to eligible individuals and their families.

The Purpose of OASDI

OASDI encompasses three distinct benefit categories, each offering a form of social insurance. Old-Age benefits provide income to eligible retired workers, constituting a significant portion of Social Security payouts.

Survivors’ benefits extend financial protection to families of deceased workers, including spouses, children, and dependent parents. Disability benefits support individuals unable to work due to a severe mental or physical condition, providing a steady income stream.

OASDI taxes fund current beneficiaries through a pay-as-you-go system. Taxes collected from today’s workers and employers directly finance benefits paid to today’s retirees, survivors, and individuals with disabilities. The program pools contributions to provide a collective safety net.

Calculating OASDI Contributions

OASDI contributions involve a specific tax rate and an annual wage base limit. For 2025, the standard OASDI tax rate is 6.2% for employees. Employers also contribute an identical 6.2%, resulting in a combined 12.4% of an employee’s wages. This total is split evenly between the worker and their employer.

A significant aspect of OASDI calculation is the annual wage base limit, also known as the Social Security taxable maximum. For 2025, this limit is set at $176,100. Earnings above this threshold are not subject to the OASDI tax. Consequently, if an employee earns $200,000 in 2025, they will only pay OASDI tax on the first $176,100 of their income, with no OASDI tax levied on the remaining $23,900.

For self-employed individuals, the responsibility for OASDI contributions differs. They are responsible for both the employee and employer portions, meaning they pay the full 12.4% on their net self-employment earnings. These contributions are made through the Self-Employment Contributions Act (SECA) tax. A notable provision for self-employed individuals is the ability to deduct one-half of their self-employment tax when calculating their adjusted gross income for federal income tax purposes.

OASDI on Pay Stubs and Tax Forms

When reviewing a pay stub, OASDI contributions are typically identified under various labels. Common designations include “SS” for Social Security, “Social Security,” or “OASDI” itself. These labels indicate the specific deduction taken from an employee’s gross wages for their share of the Old-Age, Survivors, and Disability Insurance tax. The amount withheld reflects the 6.2% employee portion of the tax.

On Form W-2, Wage and Tax Statement, specific boxes report OASDI-related information. Box 3, labeled “Social Security wages,” shows the total amount of wages subject to the Social Security tax for the year, up to the annual wage base limit. Box 4, “Social Security tax withheld,” indicates the actual amount of OASDI tax that was deducted from the employee’s paychecks throughout the year. It is important to note that the amount in Box 3 may differ from the total wages reported in Box 1 if an employee’s earnings exceed the Social Security wage base limit.

For self-employed individuals, their OASDI contributions are calculated and reported on Schedule SE (Form 1040), Self-Employment Tax. This form is used to determine the total self-employment tax liability, which includes both the Social Security and Medicare components. The calculated self-employment tax from Schedule SE then impacts the overall tax liability reported on Form 1040. OASDI contributions for employees are generally not deductible for federal income tax purposes.