Who Is Required to Pay the OASDI Tax?

Old-Age, Survivors, and Disability Insurance (OASDI) tax is a fundamental component of the U.S. Social Security system. It serves as a mandatory payroll tax for most workers, often simply referred to as Social Security tax. This tax provides financial support for individuals who have lost income due to retirement, disability, or death, ensuring a measure of financial security for millions of Americans.

What is OASDI Tax?

OASDI tax is the primary funding source for Social Security benefits in the United States. This tax is one of two components that form the Federal Insurance Contributions Act (FICA) tax, the other being Medicare tax. The OASDI program collects contributions to support retirees, individuals with disabilities, and families of deceased workers.

For 2025, the OASDI tax rate is 6.2% for employees and 12.4% for self-employed individuals. This combined rate for self-employed individuals reflects their responsibility for both the employee and employer portions of the tax. A significant feature of the OASDI tax is the annual wage base limit, also known as the taxable maximum. For 2025, this limit is $176,100, meaning any income earned above this amount is not subject to OASDI tax. This limit changes each year based on the national average wage index.

OASDI Tax for Employees

For individuals classified as employees, the OASDI tax operates through a shared responsibility with their employer. The total 12.4% OASDI tax is split evenly, with both the employee and the employer each contributing 6.2% of the employee’s gross wages. Employers are responsible for withholding the employee’s 6.2% share directly from their wages and remitting it, along with the employer’s matching 6.2% contribution, to the IRS.

Employees can typically see the OASDI tax contributions deducted from their paychecks, often listed as “OASDI” or “Social Security.” This information is also reported on their annual Form W-2, which summarizes their yearly wages and taxes withheld. These contributions are mandatory for most employees, ensuring consistent funding for the Social Security program.

OASDI Tax for Self-Employed Individuals

Self-employed individuals face a different structure for their OASDI tax obligations compared to employees. Since they function as both the employer and the employee, they are responsible for paying the entire 12.4% OASDI tax rate on their net earnings from self-employment. This combined tax is commonly referred to as self-employment tax.

The calculation and reporting of this tax typically occur on IRS Schedule SE (Form 1040), “Self-Employment Tax.” This form is used to determine the amount of self-employment tax owed based on net earnings. Self-employed individuals generally make these tax payments through estimated tax payments throughout the year, often on a quarterly basis. A notable provision allows self-employed individuals to deduct one-half of their self-employment tax from their gross income when calculating their adjusted gross income.

When OASDI Tax May Not Apply

Certain situations may lead to OASDI tax exemptions:

• Non-resident aliens, such as those holding F-1, J-1, M-1, or Q-1 visas, may be exempt from OASDI and Medicare taxes on wages earned for services performed to carry out the purpose for which they were admitted to the U.S. This exemption typically applies to students, scholars, professors, and researchers.
• Some students employed by their school, college, or university may be exempt if their employment is incidental to their education and they meet specific enrollment criteria.
• Some state and local government employees may also be exempt from OASDI tax if they are covered by a separate retirement system that provides benefits comparable to Social Security.
• Members of certain recognized religious groups may qualify for an exemption if they have conscientious objections to accepting benefits from public insurance and meet specific criteria, including waiving their rights to Social Security benefits.
• Self-employed individuals with very low net earnings from self-employment, specifically those earning less than $400 annually, are not required to pay self-employment tax, which includes OASDI.