What Is the OASDI Tax on Your Paycheck?

A line item often seen on paychecks, the Old-Age, Survivors, and Disability Insurance (OASDI) tax is a mandatory payroll deduction. This tax forms a part of the broader Federal Insurance Contributions Act (FICA) taxes, which also include Medicare. Understanding this deduction clarifies its purpose and presence on your earnings statement. This article explains what OASDI is, how contributions are determined, and the benefits it supports.

Understanding OASDI: The Basics

OASDI stands for Old-Age, Survivors, and Disability Insurance, a foundational component of the U.S. social safety net. This federal tax, mandated by the Federal Insurance Contributions Act (FICA), is designed to fund the nation’s Social Security programs. Its purpose is to provide economic security for millions of Americans through benefit payments. The program collects contributions from workers and employers to ensure benefits are available to eligible individuals.

The system operates on a pay-as-you-go basis, meaning current contributions largely fund current benefit payments. This structure helps sustain programs that support retired workers, individuals with disabilities, and families of deceased workers. The federal government establishes rules and rates governing OASDI, making it a uniform tax applied nationwide. It is distinct from other federal taxes like income tax, as its revenues are specifically earmarked for Social Security trust funds.

How OASDI Contributions Are Calculated

OASDI contributions are calculated based on a fixed percentage of earnings, up to an annually determined maximum. For 2025, the OASDI tax rate is set at 6.2% for employees. Employers also contribute an equal share of 6.2% on behalf of their employees, resulting in a combined total contribution of 12.4% of an employee’s wages.

OASDI calculation includes a “wage base limit,” also known as the taxable maximum. This limit represents the highest amount of annual earnings subject to the OASDI tax. For 2025, the Social Security wage base limit is $176,100. Earnings above this threshold are not subject to the OASDI tax.

To illustrate, if an employee earns $50,000 in 2025, their OASDI deduction would be $3,100 (6.2% of $50,000). If an employee earns $200,000, their OASDI deduction would be capped at $10,918.20 (6.2% of the $176,100 wage base limit), as earnings beyond this limit are not taxed for OASDI purposes. This means individuals with higher incomes contribute up to the maximum annual amount, but not on earnings exceeding the wage base limit.

The Benefits Funded by OASDI

The contributions collected through OASDI directly fund three primary categories of Social Security benefits, providing financial protection. These benefits are designed to support individuals and families during different life events.

One major category is Old-Age (Retirement) Benefits, which provide payments to eligible retired workers and, in some cases, their spouses and dependents. These benefits aim to replace a portion of a worker’s pre-retirement income. The amount received is based on an individual’s earnings history and age at retirement.

Survivors Benefits constitute another component, offering financial support to eligible family members of a deceased worker. This can include a surviving spouse, minor children, or dependent parents, providing a safety net for families who have lost a primary earner.

Finally, Disability Benefits provide payments to eligible workers who are unable to engage in substantial gainful activity due to a severe medical condition that is expected to last at least a year or result in death. This protection extends to workers who have contributed to the system. These three benefit types underscore the program’s role in providing social and economic security.