What Is the OASDI Tax on Your Paycheck?
Unravel the OASDI tax on your paycheck. Discover the meaning behind this critical Social Security deduction and its role in your financial future.
Among the deductions appearing on a paycheck, the Old-Age, Survivors, and Disability Insurance (OASDI) tax is a common component. This deduction plays a significant role in funding a federal program designed to provide financial security to millions of Americans. Understanding this tax helps clarify how payroll deductions contribute to broader social welfare initiatives.
Understanding OASDI
OASDI stands for Old-Age, Survivors, and Disability Insurance, the federal Social Security program. This program serves as a safety net, offering financial support to individuals in various life stages. It is administered by the Social Security Administration (SSA) and operates as a mandatory federal payroll tax.
OASDI is a component of the Federal Insurance Contributions Act (FICA) taxes, which also include Medicare taxes. While often referred to simply as “Social Security tax,” the OASDI portion specifically funds the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds. These contributions fund the system’s ability to provide benefits.
How OASDI Contributions Are Determined
The OASDI tax is applied to an individual’s earnings up to a certain annual limit. For 2025, the OASDI tax rate is 6.2% for employees, and employers pay an equal 6.2%, for a total contribution of 12.4% of eligible wages. Self-employed individuals are responsible for both portions, paying the full 12.4% of their net self-employment income.
The wage base limit for OASDI taxes is adjusted annually based on changes in the national average wage index. For 2025, individual taxable earnings up to $176,100 are subject to the OASDI tax. On a paycheck, the OASDI deduction appears as “Social Security” or “OASDI” under the tax withholdings section.
The Benefits of OASDI
Contributions to OASDI fund a federal insurance program that provides several types of benefits. These benefits are designed to partially replace income lost due to retirement, the death of a worker, or a qualifying disability. Eligibility for these benefits is determined by an individual’s earnings history and the accumulation of “work credits” over their career.
One primary benefit is Old-Age (retirement) Insurance, providing monthly payments to eligible retired workers and their spouses or dependents. Survivors Insurance provides financial support to the families of deceased workers, including eligible spouses and children. Disability Insurance provides income to workers who become unable to work due to a severe physical or mental condition.