OASDI is the payroll tax that funds Social Security and Medicare

OASDI stands for Old-Age, Survivors, and Disability Insurance. It is the payroll tax taken from your paycheck to fund Social Security retirement benefits, survivor benefits for family members of deceased workers, and Social Security Disability Insurance (SSDI). You will see it listed on your pay stub as "Social Security tax" or sometimes as part of "FICA taxes" — FICA is the broader category that includes both OASDI and Medicare.

The OASDI tax rate is 6.2 percent of your wages, and your employer matches that with another 6.2 percent. If you are self-employed, you pay both portions yourself — 12.4 percent total. The tax applies only to wages up to a certain limit each year; in 2024, that limit is $168,600, meaning once you earn that much in a year, OASDI tax stops being taken from your paychecks.

The money you and your employer pay does not sit in a personal account with your name on it. Instead, it goes into a single trust fund that pays current benefits to people who are retired, disabled, or whose family members have died. When you retire or become disabled, your own benefits come from taxes paid by workers who are working at that time.

Key Takeaways

  • OASDI is a 6.2 percent payroll tax split between you and your employer, used to fund Social Security retirement, disability, and survivor benefits.
  • The tax applies only to wages below an annual cap, which changes each year — in 2024 it is $168,600.
  • Money paid into OASDI does not go into a personal savings account; it pays current benefits to retirees and disabled workers.
  • You can see your estimated OASDI benefits by creating an account on ssa.gov and viewing your Social Security statement.

How OASDI taxes are calculated on your paycheck

Your employer calculates OASDI tax by taking 6.2 percent of your gross wages — the amount before taxes and deductions — up to the annual wage cap. If you earn $50,000 in a year, you pay $3,100 in OASDI tax (6.2 percent of $50,000). Your employer also sends $3,100 to the Social Security trust fund on your behalf.

The wage cap means high earners pay a smaller percentage of their total income. If you earn $200,000 in 2024, you pay OASDI tax only on the first $168,600 of that income — which is $10,453.20 — not on the remaining $31,400. The cap increases most years based on wage growth in the economy.

If you work for multiple employers in the same year, each one withholds OASDI tax separately. You might end up paying more than the cap requires. When that happens, you can claim a credit for the overpayment when you file your federal income tax return.

The difference between OASDI and Medicare tax

OASDI and Medicare are often grouped together as "FICA taxes," but they fund different programs. OASDI (6.2 percent) funds Social Security. Medicare tax (1.45 percent) funds the hospital insurance part of Medicare, which covers people 65 and older and some younger people with disabilities. Your employer matches the Medicare portion as well.

Medicare tax has no wage cap — it applies to all your earnings no matter how much you make. Additionally, if you earn more than $200,000 as a single filer (or $250,000 if married filing jointly), you pay an extra 0.9 percent Medicare tax on the income above that threshold. This extra tax was added in 2013 and appears separately on your pay stub.

What your OASDI taxes pay for

OASDI funds three types of Social Security benefits. Retirement benefits go to workers who reach full retirement age — currently between 66 and 67 depending on birth year. Disability benefits (SSDI) go to workers under full retirement age who have a medical condition expected to last at least 12 months or result in death. Survivor benefits go to the spouse, children, and parents of a worker who has died.

To receive any of these benefits, you must have worked long enough and paid OASDI taxes for a certain number of years. The exact requirement depends on your age and the type of benefit. For example, to receive retirement benefits at full retirement age, you typically need 40 work credits, which most people earn by working 10 years.

How to check your OASDI earnings record

The Social Security Administration keeps a record of all the wages you have earned and the OASDI taxes you have paid. You can view this record by creating a "my Social Security" account at ssa.gov. The account shows your earnings history year by year and an estimate of what your retirement, disability, or survivor benefits might be.

Checking your record is useful because errors can happen. If your employer reported your wages incorrectly or your name changed and the records did not match, you might not get credit for those earnings. You have a limited time to correct errors — generally three years, three months, and 15 days from the end of the year the wages were earned — so it is worth checking every few years.

What happens if you do not pay OASDI taxes

If you work as an employee, OASDI tax is automatically withheld from your paycheck, so you cannot avoid paying it. However, some workers are exempt. Government employees hired before 1984 in certain states do not pay OASDI tax because they are covered by a different pension system. Some religious groups that object to accepting government benefits can request an exemption.

If you are self-employed, you are responsible for calculating and paying OASDI tax yourself when you file your annual tax return. Self-employed workers report their net business income and pay both the employee and employer portions — 12.4 percent total — as part of their self-employment tax.

Not paying OASDI taxes when you are required to do so can result in penalties and interest, and you will not earn work credits toward future Social Security benefits. If you have questions about whether you owe OASDI tax, the IRS website and your tax preparer can help clarify your situation.

Frequently Asked Questions

Can I get my OASDI taxes back if I do not use Social Security?

No. OASDI taxes are mandatory for most workers and fund a shared pool of benefits, not individual accounts. Even if you never claim Social Security benefits, the taxes you paid go toward current retirees and disabled workers. You cannot withdraw or transfer OASDI contributions.

What is the difference between OASDI and SSI?

OASDI (Old-Age, Survivors, and Disability Insurance) is a payroll tax that funds Social Security benefits based on your work history. SSI (Supplemental Security Income) is a separate needs-based program for people with low income and limited resources who are 65 or older, blind, or disabled. SSI does not require a work history and is funded by general tax revenue, not payroll taxes.

Do I pay OASDI tax on tips?

Yes. Tips are considered wages and are subject to OASDI tax. Your employer should include reported tips in your gross wages when calculating payroll taxes. If you receive cash tips that your employer does not know about, you are still required to report them to your employer and pay OASDI tax on them.

Why does the OASDI wage cap exist?

The wage cap limits how much income is taxed each year. It was designed so that higher earners do not pay a larger percentage of their income in OASDI tax than middle-income workers. The cap increases most years to keep pace with wage growth in the economy, but it means high earners pay a smaller share of their total income in OASDI tax.