What Is the OASDI Tax on Your Paycheck?
Demystify the OASDI tax line on your pay stub. Learn the purpose and impact of this essential contribution to your financial future.
Old-Age, Survivors, and Disability Insurance, commonly known as OASDI, is a component of your paycheck deductions. It is widely recognized as the Social Security tax, a mandatory payroll deduction. This tax funds the Social Security benefits program, which provides financial support to millions of Americans.
What OASDI Represents
OASDI encompasses three types of benefits. “Old-Age” benefits provide retirement income for eligible workers when they reach a certain age. “Survivors” benefits offer financial assistance to families of deceased workers, including spouses and children. “Disability Insurance” provides income replacement for individuals unable to work due to a severe medical condition or injury. Both employees and their employers contribute to this federal fund, and the deduction appears on pay stubs under labels like “Social Security,” “SS Tax,” or “OASDI.”
How OASDI Tax is Determined
The calculation of the OASDI tax involves specific rates and an annual wage base limit. For employees, the contribution rate is 6.2% of their gross wages, and employers contribute an equal 6.2%, for a combined 12.4%. Self-employed individuals pay the combined rate of 12.4% on their net self-employment income, as they act as both employee and employer for tax purposes.
The annual “wage base limit” for OASDI tax changes each year based on the national average wage index. For 2025, the wage base limit is $176,100, meaning any earnings above this amount are not subject to the OASDI tax. For example, an employee earning $70,000 in 2025 would have $4,340 withheld for OASDI ($70,000 0.062). If an employee earns $200,000 in 2025, only the first $176,100 is taxed, resulting in a maximum employee contribution of $10,918.20 ($176,100 0.062) for the year.
OASDI as Part of FICA
OASDI is one of the two main components of the Federal Insurance Contributions Act (FICA) tax. The other component is Medicare tax, which funds hospital insurance for eligible individuals.
The Medicare tax rate is 1.45% for both employees and employers, with no wage base limit. In some cases, an additional 0.9% Medicare tax applies to earned income exceeding certain thresholds, such as $200,000 for single filers, though employers do not match this additional amount. FICA tax represents the total mandatory deduction for both Social Security (OASDI) and Medicare taxes on your earnings.