OASDI is the Social Security and Medicare tax taken from your paycheck

OASDI stands for Old-Age, Survivors, and Disability Insurance. It is the official name for Social Security tax. When you see "OASDI" on your pay stub, it means your employer is withholding money to fund Social Security benefits — the monthly payments that go to retirees, disabled workers, and surviving family members of workers who have died.

The OASDI tax rate is 6.2 percent of your gross wages (what you earn before deductions). Your employer also pays 6.2 percent on your behalf, for a combined total of 12.4 percent. If you are self-employed, you pay both portions yourself — 12.4 percent total — because you are both employee and employer.

OASDI is separate from Medicare tax, which appears as a different line item on your paycheck. Medicare tax is 1.45 percent for employees and 1.45 percent for employers. Together, OASDI and Medicare make up what is often called "FICA taxes" (Federal Insurance Contributions Act).

Key Takeaways

  • OASDI tax funds Social Security benefits for retirees, disabled workers, and their surviving family members.
  • The OASDI rate is 6.2 percent of your wages, withheld from your paycheck, plus 6.2 percent paid by your employer.
  • There is a wage cap: in 2024, you only pay OASDI tax on the first $168,600 of annual income, so high earners stop paying partway through the year.
  • Self-employed workers pay the full 12.4 percent OASDI tax themselves, but can deduct half of it on their tax return.
  • OASDI tax is mandatory for nearly all workers in the United States, including most government employees hired after 1983.

How the OASDI wage cap works

Not all of your income is subject to OASDI tax. There is a wage cap — a maximum amount of annual earnings that gets taxed. In 2024, the cap is $168,600. This means if you earn $200,000 in a year, you only pay OASDI tax on the first $168,600. Once you reach that cap, your employer stops withholding OASDI tax from your remaining paychecks for that year.

The wage cap changes every year based on national wage trends. It typically increases by a small amount annually. This is why high-earning workers often see OASDI tax disappear from their paychecks partway through the year — they have already hit the cap.

Medicare tax, by contrast, has no wage cap. You pay 1.45 percent Medicare tax on all your wages, no matter how much you earn. High earners also pay an additional 0.9 percent Medicare tax on wages above $200,000 (or $250,000 for married couples filing jointly).

Why OASDI appears on your paycheck

OASDI tax funds a specific insurance program. When you work and pay OASDI tax, you are building a record of contributions that determines your future Social Security benefits. The amount you receive in retirement depends partly on how much you paid in over your working years.

The program also covers more than just retirement. If you become disabled before retirement age, you may receive Social Security Disability Insurance (SSDI) payments. If you die, your spouse, children, or parents may receive survivor benefits. These payments come from the same OASDI tax pool.

Your employer is required by law to withhold OASDI tax and send it to the Social Security Administration. You cannot opt out of OASDI tax, even if you plan to retire early or do not expect to use Social Security benefits. The only exceptions are certain government employees and some religious groups with specific beliefs about insurance.

Self-employed workers and OASDI tax

If you are self-employed, you pay OASDI tax through self-employment tax when you file your annual tax return. You pay 12.4 percent OASDI tax on your net self-employment income (your business profit after expenses), up to the annual wage cap.

Self-employment tax feels higher because you pay both the employee and employer portions. However, the tax code allows you to deduct half of your self-employment tax on your income tax return, which reduces your taxable income. This deduction partially offsets the burden of paying both sides.

Self-employed workers report self-employment tax on Schedule SE (Self-Employment Tax) and pay it along with their annual income tax return. You may also need to make quarterly estimated tax payments if you expect to owe more than a certain amount.

How OASDI tax differs from income tax

OASDI tax and federal income tax are two separate deductions on your paycheck. OASDI tax is a flat 6.2 percent (up to the wage cap) and goes directly to the Social Security trust fund. Income tax is calculated based on your tax bracket, filing status, and deductions, and goes to the general U.S. Treasury.

You cannot reduce your OASDI tax by claiming deductions or credits the way you can with income tax. The rate is the same whether you earn $30,000 or $300,000 per year (though high earners hit the wage cap). Income tax, by contrast, is progressive — higher earners pay a higher percentage.

Both are withheld from your paycheck automatically. If too much or too little is withheld, you settle the difference when you file your tax return in April. OASDI tax withholding is usually accurate because the calculation is straightforward, so most workers do not owe or receive a refund related to OASDI.

Reading OASDI on your pay stub

Your pay stub breaks down all deductions from your paycheck. You will typically see a line labeled "OASDI," "Social Security," or "FICA-OASDI" showing the amount withheld. Next to it should be a year-to-date total showing how much you have paid in OASDI tax so far that year.

If you have already hit the wage cap for the year, the OASDI line will show $0.00 for the current paycheck, but the year-to-date total will reflect all the OASDI tax you paid earlier in the year. This is normal and expected for high earners.

You can also track your OASDI contributions through your Social Security account at ssa.gov. Your account shows your earnings history and an estimate of your future Social Security benefits based on your contributions so far. Checking this periodically helps you verify that your employer is reporting your wages correctly.

Frequently Asked Questions

What happens to the OASDI tax I pay?

OASDI tax goes into the Social Security trust fund, which pays current benefits to retirees, disabled workers, and survivors. The program operates on a pay-as-you-go basis — current workers' taxes fund current beneficiaries' payments. Your contributions also build your own benefit record, which determines how much you receive when you retire or become disabled.

Can I get a refund of OASDI tax if I overpay?

If you work for multiple employers in the same year and overpay OASDI tax (because each employer withholds without knowing about your other jobs), you can claim a refund on your tax return. You cannot get a refund straightforward because you do not plan to use Social Security — the tax is mandatory and non-refundable under normal circumstances.

Does OASDI tax explore to all types of income?

OASDI tax applies to wages and self-employment income. It does not explore to investment income, rental income, or most other sources. However, certain types of compensation like bonuses, commissions, and tips are subject to OASDI tax just like regular wages.

Why is OASDI tax withheld if I am already paying income tax?

OASDI and income tax fund different programs. OASDI funds Social Security specifically, while income tax funds general government operations. Both are required by law, and both are withheld from most paychecks. They are calculated separately and serve different purposes.

What if my employer did not withhold OASDI tax?

Report this to your employer when ready. They are legally required to withhold and remit OASDI tax. If they fail to do so, contact the Social Security Administration or the Department of Labor. You may also owe self-employment tax on those wages when you file your tax return, depending on your employment classification.