OASDI is the Social Security and Medicare tax withheld from your wages

OASDI stands for Old-Age, Survivors, and Disability Insurance. It is the official name for Social Security tax. When you see "OASDI" on your paycheck stub, it means your employer is withholding money to fund Social Security benefits — the payments that go to retirees, disabled workers, and survivors of deceased workers.

The withholding appears as a line item separate from federal income tax. As of 2024, you pay 6.2 percent of your gross wages up to a yearly earnings cap (the cap changes annually). Your employer matches that 6.2 percent and sends both amounts to the federal government. If you are self-employed, you pay both the employee and employer portions yourself, which is 12.4 percent total.

The money does not go into a personal account with your name on it. Instead, it funds current Social Security payments to people already receiving benefits. When you retire or become unable to work, your own benefits will be funded by workers paying in at that time.

Key Takeaways

  • OASDI tax funds Social Security benefits for retirees, disabled workers, and their survivors, and is withheld from your paycheck at 6.2 percent of wages.
  • Your employer matches your OASDI contribution and sends the combined amount to the federal government each pay period.
  • There is an annual earnings cap above which OASDI tax is not withheld, meaning high earners stop paying partway through the year.
  • The amount you eventually receive in Social Security benefits is based on your lifetime earnings record and the age at which you claim, not on how much tax you paid in.

How much OASDI tax comes out of your paycheck

The rate is fixed at 6.2 percent of your gross wages. If you earn $1,000 in a pay period, OASDI withholding is $62. The withholding continues throughout the year until you reach the annual earnings cap.

For 2024, the earnings cap is $168,600. Once your year-to-date wages reach that amount, no more OASDI tax is withheld for the rest of that calendar year. This means high earners stop seeing OASDI on their paychecks partway through December. The cap increases most years based on wage growth in the economy.

Medicare tax, which is sometimes confused with OASDI, is separate. Medicare tax is 1.45 percent and has no earnings cap — it continues on all wages throughout the year. Together, OASDI and Medicare are sometimes called "payroll taxes" or "FICA taxes" (Federal Insurance Contributions Act).

Why OASDI appears separately from income tax

Federal income tax and OASDI tax are two different systems with different purposes and different rules. Income tax funds general government operations. OASDI tax funds a specific insurance program — Social Security.

Because they are separate, you can see exactly how much of each is being withheld. This matters because OASDI has a wage cap and income tax does not. It also matters because if you change jobs or have periods without work, your OASDI record is tracked separately from your income tax record.

How OASDI tax connects to your future Social Security benefit

The Social Security Administration keeps a record of your earnings and the OASDI tax you paid each year. This record is called your earnings record. When you reach retirement age or become disabled, the agency uses your highest 35 years of earnings to calculate your monthly benefit amount.

However, paying more OASDI tax does not automatically mean a higher benefit. What matters is your actual earnings in each year, not the tax rate. Two people earning the same amount in the same year will have the same earnings credited to their record, regardless of tax rate changes.

Your benefit also depends on when you claim. If you claim at your full retirement age (which ranges from 66 to 67 depending on your birth year), you receive your full calculated benefit. If you claim earlier, the monthly amount is reduced. If you delay claiming past your full retirement age, the monthly amount increases by about 8 percent per year until age 70.

What happens if you overpay OASDI tax

If you work for multiple employers in the same year, you might pay OASDI tax on earnings above the annual cap. For example, if you work two jobs and earn $90,000 at each, you will pay OASDI tax on the full $180,000 even though the cap is $168,600.

When this happens, you have overpaid. You can claim a credit for the overpayment on your federal income tax return. The IRS will refund the excess when you file, usually as part of your overall tax refund. You do not need to contact Social Security — the tax return handles it automatically.

OASDI tax for self-employed workers

If you are self-employed, you pay both the employee portion (6.2 percent) and the employer portion (6.2 percent) of OASDI tax, for a total of 12.4 percent. You calculate this on your net self-employment income using Schedule SE, which is part of your tax return.

You can deduct half of your self-employment tax as a business expense on your income tax return, which reduces your overall tax burden slightly. The Social Security Administration still credits your earnings record based on your net self-employment income, the same way it credits W-2 employees.

Checking your OASDI earnings record

You can view your official earnings record and get an estimate of your future Social Security benefit by creating an account at ssa.gov (the Social Security Administration website). You will need to verify your identity, which usually takes a few minutes.

Your account shows your year-by-year earnings history and flags any years where earnings were not recorded. If you spot an error — for example, earnings from a job that do not appear — you can report it to Social Security. Errors are usually corrected within a few months if you provide documentation like a W-2 or pay stub.

You should check your record every few years, especially after changing jobs or if you have had periods of self-employment. Catching errors early makes it easier to fix them before you claim benefits.

Frequently Asked Questions

Can I opt out of paying OASDI tax?

No. OASDI tax is mandatory for all workers in the United States, with very limited exceptions for certain religious groups and some government employees hired before 1984. If you are a W-2 employee or self-employed, you must pay.

What if I never worked long enough to get Social Security?

You need 40 credits to receive retirement benefits (roughly 10 years of work). If you do not reach 40 credits, you will not receive a retirement benefit based on your own record. However, you may be able to receive a benefit based on a spouse's or ex-spouse's record if you meet other requirements.

Does OASDI tax go into a personal account with my name on it?

No. OASDI tax funds current benefits for people already retired or disabled. Your own future benefit will be funded by workers paying in when you claim. This is called a pay-as-you-go system, not a savings account.

Why is the OASDI earnings cap so high?

The cap exists because Social Security was designed to replace a portion of average workers' income, not to provide unlimited benefits to high earners. The cap is adjusted yearly based on wage growth in the economy. High earners still receive benefits, but the benefit formula means they replace a smaller percentage of their pre-retirement income.

If I move to another country, do I still pay OASDI tax?

If you work for a U.S. employer or are self-employed in the United States, you must pay OASDI tax regardless of where you live. If you work for a foreign employer while living abroad, the rules depend on tax treaties between the U.S. and that country. Consult a tax professional if this applies to you.