OASDI tax on a paycheck is one of two taxes the IRS collects under the Federal Insurance Contributions Act (FICA). It stands for old-age, survivors, and disability insurance, and it’s designed to replace income lost due to retirement, disability, or death. Some people refer to it as Social Security tax. The other tax provides for Medicare. For most workers, these taxes are unavoidable.
Key Points
• OASDI tax, or Social Security tax, funds benefits for retired, disabled workers, and their dependents or survivors.
• Both employees and employers contribute 6.2% of wages up to a specific limit.
• The wage base limit for OASDI tax is set at $176,100 for 2025.
• Self-employed individuals pay 15.3% in OASDI and Medicare taxes, including 12.4% for OASDI.
• OASDI tax is mandatory and funds current Social Security benefits, unlike personal retirement plan contributions.
What Is OASDI Tax?
OASDI is short for old-age, survivors, and disability insurance (you may hear it referred to as Social Security tax). It’s one of the types of taxes that many people in the U.S. pay. The OASDI program uses tax dollars to provide financial support to qualified people who are:
• Retired
• Disabled
• Dependents of retired or disabled workers
• Survivors of insured workers
As of December 2024, approximately 70 million Americans received benefits funded through the OASDI tax. The majority, 51.8 million, were retired workers who received an average benefit of $1,975 monthly.
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Why Does OASDI Tax Appear on My Paycheck?
If you see OASDI on your pay stubs, it’s another way to indicate Social Security taxes, as noted above. Your employer might list it as FICA Social Security tax or FICA SS tax on your pay stub instead of OASDI tax.4
Your pay stub may show two totals for OASDI tax paid.
• Current period. This is the amount of OASDI tax that was taken out of your paycheck for the current pay period.
• Year-to–date. This amount is how much OASDI tax you’ve paid for the year, up to the current pay period.
You and your employer both pay Social Security tax, but your pay stub may only show your contributions.
How Does OASDI Tax Work?
OASDI tax is collected from workers to fund Social Security benefit programs for eligible people. The tax is assessed at a flat rate.
• You pay 6.2% for Social Security tax.
• Your employer pays 6.2%, for a combined 12.4% in OASDI tax.
OASDI tax is one part of FICA taxes; Medicare tax is the other. The current Medicare tax rate is 2.9%, which is split evenly, with 1.45% paid by the employee and the same amount contributed by the employer.
FICA tax deductions are automatic; you don’t have to remember to make those contributions or opt into them. Social Security and Medicare taxes paid are not eligible for a tax deduction. The rate is not dependent on your income tax withholding either. Every worker who’s required to pay OASDI tax pays the same percentage of their earnings.
(Tip: If you want to keep track of where your income goes besides taxes, a money tracker app can help you see your spending and saving. Check with your bank to see what tools they may offer.)
As you’re preparing for tax season, you should get a W-2 from your employer that shows all the taxes you paid throughout the year.
Is OASDI federal tax only? Yes, there’s no state tax equivalent.
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OASDI Tax for Self-Employed People
Being self-employed doesn’t let you off the hook for OASDI tax (nor for Medicare tax). The self-employed tax rate is 15.3%, which is split between 12.4% for OASDI and 2.9% for Medicare tax. Knowing that this amount needs to be paid can help you manage your online budget planning more effectively.
You’ll calculate self-employment tax using Schedule SE, Self-Employment Tax, when you file your Form 1040. You can deduct the employer-equivalent portion of self-employment tax when you calculate your adjusted gross income.
OASDI Limit 2024
The OASDI tax isn’t unlimited; the program caps the amount of earnings subject to taxation each year. Once you hit the wage base limit for the year, any additional earnings over that amount are not subject to the OASDI tax.
For 2024, the OASDI wage base limit was $168,600. That means the most workers would have paid in Social Security tax was $10,453.20. Self-employed individuals paid a maximum of $20,906.40.
OASDI Limit 2025
The OASDI tax limit for 2025 is $176,100. So the maximum tax employees will pay to Social Security is $10,918.20. If you’re self-employed, you’ll contribute no more than $21,836.40.
The wage base limit only applies to OASDI tax. There’s no limit on taxable earnings for the Medicare tax.
In fact, high-income earners may be subject to an additional Medicare tax of 0.9%. This tax applies to Medicare wages, self-employment income, and railroad retirement compensation that exceeds these amounts:
• $250,000 (for married couples filing jointly)
• $125,000 (for married couples filing separately)
• $200,000 (for everyone else)
The additional Medicare tax funds the premium tax credit and other provisions of the Affordable Care Act (ACA).
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Is OASDI Tax Mandatory?
OASDI tax is mandatory for most people, whether they work for an employer or are self-employed. Some exceptions exist for people who are:
• Nonresidents and nonimmigrant aliens who hold A, D, F, G, or H visas
• Members of certain religious groups who have a conscientious objection to receiving benefits from a private or public insurance plan
• Self-employed and earn less than $400 annually
Generally, it’s difficult to avoid paying Social Security and Medicare taxes.
Is Social Security Tax the Same as the OASDI Tax?
Social Security tax usually means the same thing as OASDI tax. It’s money that comes out of your paycheck to fund benefit programs for elderly, retired, and disabled workers and their dependents or survivors.
If you’re looking at your pay stubs and see Social Security tax listed but no deduction for OASDI tax, you’re still paying it. Your employer just uses a different name for it. This may be a point you learn when you are paying taxes for the first time and delving into where your income goes.
OASDI Taxes for Nonresident U.S. Citizens
Living outside the U.S. doesn’t exempt you from federal tax obligations, including OASDI tax, as long as you maintain citizenship. You’ll still owe Social Security and Medicare tax if you work for an American employer, including for:
• The federal government
• Any individual who is a U.S. resident
• A partnership where at least two-thirds of partners are U.S. residents
• A trust whose trustees are all U.S. residents
• A corporation organized under the laws of the United States, a U.S. state, or a U.S. territory
You’ll also pay OASDI tax if you work in a country that has a bilateral social security agreement with the U.S., and the agreement states that your earnings are subject to Social Security and Medicare taxes.
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Does the OASDI Tax Cover Retirement Expenses?
OASDI tax is paid back to Americans in the form of Social Security benefits. Social Security represents around 31% of income for people aged 65 or older who use that money to cover retirement expenses, at least in part.
Keep in mind that paying into Social Security through OASDI tax is not the same as having retirement plan contributions deducted from your paychecks.
• When you pay OASDI tax, the money goes into a pool that’s used to fund payments for people who are collecting benefits now.
• Retirement plan contributions, meanwhile, go into a tax-advantaged account that only you can make withdrawals from according to the plan’s guidelines.
OASDI Tax Tips
OASDI tax is unavoidable for most people, whether you earn an average salary, entry-level pay, or are among the 1%. Here are a few tips for navigating the Social Security tax deductions you see noted on your paystubs.
• Stay aware. The OASDI tax rate has largely held steady for decades, but the tax code is always subject to change. Staying clued in to changes to OASDI tax rates and wage base limits can help you estimate how much you’ll pay each year.
• Check for accuracy. Errors can happen, and it’s possible your employer might report the wrong amount of OASDI tax on your paystubs or W-2s. (And you could get it wrong if you’re doing the calculations for self-employed tax; it’s one of several common tax filing mistakes). Reviewing your tax documents before you file can help you spot errors so you can request a correction.
• Review your Social Security statements. The Social Security Administration provides statements showing your OASDI and Medicare taxes paid and your earnings history. You can use yours to estimate how much you might collect in Social Security benefits when you retire.
The Takeaway
OASDI tax on a paycheck indicates that you’re paying money into Social Security programs. You’ll pay this tax whether you work for an employer or yourself, with some exceptions. This information is helpful to know if you’re watching your budget and wondering where some of the money you earned went or thinking about how you’ll afford retirement.
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FAQ
Why is OASDI taken out of my paycheck?
OASDI tax is taken out of your paycheck to fund Social Security programs for those who have income loss due to retirement, disability, or death.
Is it mandatory to pay OASDi tax?
Certain types of taxes are unavoidable, and OASDI tax is typically one of them. While there are some exceptions to paying Social Security tax, only a minority of taxpayers qualify.
Can I get OASDI tax back?
You can benefit from the OASDI taxes you’ve paid when you collect benefits from Social Security. That includes Social Security retirement and disability benefits. It’s also possible that you could overpay OASDI tax for a particular time period. In that case, you may be able to get the overage paid back to you, either from your employer or by filing Form 843 with the Internal Revenue Service (IRS).
What is the difference between OASDI and Social Security?
OASDI tax and Social Security tax are the same thing; they are just different terms. Along with Medicare tax, OASDI tax is part of what you pay for FICA taxes.
Can I opt out of OASDI tax?
You could request an exemption from paying OASDI tax on religious grounds. You’ll need to be able to prove that you belong to a religious organization that conscientiously objects to receiving benefits from private or public insurance plans.
At what age is Social Security no longer taxed?
Social Security is taxable at any age, though whether it’s subject to tax depends on your income. Your benefits may be taxable if the total of one-half of your benefits plus all other income you receive exceeds the base amount for your filing status. The base amount is:
• $25,000 for single filers, heads of household, and qualifying surviving spouses
• $25,000 married couples who file separately and don’t live together
• $32,000 married couples filing jointly
• $0 for married couples who file separately but still live together.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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