What Is the OASDI Tax Deduction on My Paystub?
Decode the OASDI deduction on your paystub. Gain clarity on this essential payroll tax and its role in funding vital Social Security benefits.
Many individuals review their paystubs and notice a variety of deductions taken from their gross wages. These deductions often include federal, state, and local taxes, as well as contributions for benefits like health insurance or retirement plans. Among these line items, one frequently seen but perhaps less understood deduction is OASDI. This article aims to clarify what OASDI stands for and why it appears as a regular deduction on a worker’s paystub.
What OASDI Means
OASDI stands for Old-Age, Survivors, and Disability Insurance, representing a mandatory federal payroll tax. This tax is a core component of the Social Security system, designed to provide financial protection to millions of Americans. It functions as a social insurance program, where current workers contribute to a fund that provides benefits to eligible recipients. The OASDI tax is collected under the Federal Insurance Contributions Act (FICA), which also includes Medicare taxes.
Your employer is responsible for withholding this tax directly from your gross wages each pay period. This deduction is a legal requirement for most wage earners in the United States.
How OASDI Contributions Are Calculated
The calculation of OASDI contributions involves a specific tax rate applied to a worker’s gross wages, up to an annual limit. For 2025, the OASDI tax rate for employees is 6.2% of their gross wages. Employers also contribute an equal 6.2% on behalf of each employee, meaning a total of 12.4% of wages are directed to the OASDI program.
A crucial aspect of this calculation is the “wage base limit,” also known as the taxable maximum. This limit represents the maximum amount of annual earnings subject to the OASDI tax. For 2025, the wage base limit is $176,100. This means that any earnings above this threshold are not subject to the OASDI tax for that year. For example, an employee earning $200,000 in 2025 would only pay OASDI tax on the first $176,100 of their income, resulting in a maximum contribution of $10,918.20 ($176,100 multiplied by 6.2%).
The Social Security Benefits Funded by OASDI
The contributions made through OASDI taxes are channeled into the Social Security trust funds, which then disburse various types of benefits. The three main categories of benefits funded by OASDI contributions are Old-Age, Survivors, and Disability Insurance.
Old-Age benefits, commonly known as retirement benefits, provide income to eligible retired workers and their spouses or dependents. These payments help support individuals who have reached a certain age and have contributed sufficiently to the system throughout their working lives.
Survivors benefits offer financial support to the families of deceased workers, including spouses, children, and dependent parents, helping them cope with the loss of income. Disability benefits provide a steady income to workers who become severely disabled and are unable to perform substantial gainful activity, as well as their eligible family members.