What Is the OASDI Tax on Your Paystub?
Understand the OASDI deduction on your paystub and its role in your future financial security.
When reviewing your paystub, you might notice a deduction labeled “OASDI.” This represents a mandatory payroll tax that contributes to programs designed to provide financial security. Understanding OASDI’s meaning and its impact on your earnings and future benefits can demystify this common deduction. This article explains its purpose, how contributions are calculated, and its connection to your future financial well-being.
What OASDI Stands For and Funds
OASDI stands for Old-Age, Survivors, and Disability Insurance. These contributions are a part of the United States’ social safety net, primarily funding the Social Security program. Social Security provides benefits in various circumstances to eligible individuals and their families.
The “Old-Age” component refers to retirement benefits, offering income to individuals once they reach a certain age and cease working. “Survivors” benefits provide financial support to the families of deceased workers who contributed to the system, such as spouses and dependent children. Lastly, “Disability Insurance” offers assistance to workers who become unable to work due to a significant medical condition. This system aims to protect Americans from financial hardship in retirement, after the death of a breadwinner, or in the event of a severe disability.
How OASDI Contributions Are Calculated
The OASDI tax is a component of the Federal Insurance Contributions Act (FICA) tax, which also includes Medicare tax. OASDI specifically refers to the portion that funds Social Security benefits. Both employees and employers contribute to OASDI.
For employees, the OASDI tax rate is 6.2% of their gross wages. Employers pay a matching 6.2%, meaning a total of 12.4% of wages is contributed to the OASDI program. This 6.2% employee share is the amount you see deducted from your paycheck.
There is an annual wage base limit for OASDI. For 2025, the Social Security wage base limit is $176,100. Any earnings above this threshold are not subject to the OASDI tax. This limit means that high-income earners will stop contributing to OASDI once their cumulative earnings for the year reach this amount.
OASDI and Your Future Benefits
Your OASDI contributions are directly linked to your eligibility for future Social Security benefits. As you work and pay OASDI taxes, you earn “credits” toward these benefits. The Social Security Administration uses these credits to determine if you are “insured” for retirement, survivor, or disability benefits.
You can earn up to four credits each year. In 2025, you earn one Social Security credit for every $1,810 in covered earnings, up to the maximum of four credits for $7,240 in annual earnings. Most workers need 40 credits, equivalent to 10 years of work, to be fully insured for retirement benefits. The total number of credits earned determines eligibility, but the amount of your future benefits is generally based on your average lifetime earnings on which OASDI taxes were paid.