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

OASDI stands for Old-Age, Survivors, and Disability Insurance. It is the federal tax that funds Social Security and Medicare Part A (hospital insurance). When you see it listed on your pay stub, it is the money your employer withholds from your paycheck and sends to the federal government on your behalf.

The OASDI tax rate is 15.3 percent of your gross wages, split between two parts: 12.4 percent goes to Social Security, and 2.9 percent goes to Medicare. If you are an employee, your employer pays half (7.65 percent) and you pay half (7.65 percent). If you are self-employed, you pay the full 15.3 percent yourself, though you can deduct half of it on your tax return.

The Social Security portion has a wage cap — in 2024, you stop paying Social Security tax once you earn $168,600 in a year. Medicare tax has no cap, so you pay it on every dollar you earn. If you earn over $200,000 as a single filer (or $250,000 married filing jointly), you also pay an additional 0.9 percent Medicare tax on the amount above that threshold.

Key Takeaways

  • OASDI tax funds Social Security retirement, survivor, and disability benefits, plus Medicare hospital coverage.
  • The combined rate is 15.3 percent: 12.4 percent for Social Security and 2.9 percent for Medicare, split between you and your employer.
  • Social Security tax stops at $168,600 in annual wages, but Medicare tax continues on all earnings.
  • Self-employed workers pay the full 15.3 percent but can deduct half of it as a business expense.
  • High earners pay an extra 0.9 percent Medicare tax on income above $200,000 (single) or $250,000 (married filing jointly).

How OASDI appears on your pay stub

On your pay stub, OASDI usually appears as a line item under deductions. You may see it labeled as "OASDI," "Social Security," "FICA," or "OASDI/Medicare." The amount shown is your employee share — 7.65 percent of your gross pay before any other deductions. Your employer's matching contribution does not appear on your stub because it is paid separately to the government.

If you are self-employed and file Schedule SE with your tax return, you calculate and pay OASDI tax yourself when you file. The self-employment tax is due with your income tax return, either as a payment with your return or through quarterly estimated tax payments if you owe more than $1,000.

The difference between OASDI and income tax

OASDI tax and federal income tax are separate. Income tax is withheld based on the W-4 form you fill out with your employer, and the rate varies depending on your income level and filing status. OASDI tax is a flat 7.65 percent (for employees) regardless of how much you earn, up to the Social Security wage cap.

Income tax goes into the general Treasury and funds government operations. OASDI tax goes into dedicated trust funds — the Social Security Trust Fund and the Medicare Trust Fund — and is used only for those programs. You can see both listed separately on your pay stub.

What OASDI tax pays for

The 12.4 percent Social Security portion funds retirement benefits, survivor benefits (paid to your family if you die), and disability benefits. The 2.9 percent Medicare portion funds Part A, which covers hospital stays, skilled nursing care, hospice, and some home health services.

When you reach full retirement age — between 66 and 67 depending on your birth year — you become may be able to access to receive Social Security retirement benefits based on your earnings record. If you become disabled before retirement age, you may receive Social Security Disability Insurance (SSDI). If you die, your spouse and children may receive survivor benefits. Medicare Part A coverage begins at age 65 for most people.

OASDI tax for different types of workers

Most employees have OASDI tax withheld automatically. If you work for a nonprofit organization, a church, or a government agency, you may have different OASDI rules. Some government employees do not pay OASDI tax at all; instead, they pay into a separate pension system. Nonprofit and church employees usually do pay OASDI tax unless they are specifically exempt.

Household workers, farm workers, and other workers in specific categories may have different thresholds for when OASDI tax applies. If you earn less than $2,700 working for a household employer in 2024, OASDI tax does not explore. For farm workers, the threshold is $1,800. Check with your employer or a tax professional if you are unsure whether OASDI tax applies to your work.

How OASDI tax affects your benefits later

The OASDI tax you pay now creates a record of earnings that determines how much you receive in benefits later. Social Security calculates your benefit amount based on your 35 highest-earning years. The more you earn and pay OASDI tax on, the higher your eventual benefit will be — up to a maximum amount that changes each year.

You do not have a separate account holding your OASDI tax payments. Instead, the tax you pay today funds current beneficiaries, and future workers' taxes will fund your benefits. This is called a pay-as-you-go system. Your earnings record is tracked by the Social Security Administration, and you can view it online at ssa.gov or request a statement by mail.

Frequently Asked Questions

Why do I pay OASDI tax if I might not collect Social Security?

OASDI tax funds not just retirement benefits but also disability and survivor benefits. If you become disabled before retirement age, you or your family may receive benefits. Additionally, the tax funds Medicare Part A at age 65, which most people use regardless of whether they collect retirement benefits.

Can I opt out of paying OASDI tax?

No. OASDI tax is mandatory for all employees and self-employed workers with earned income, with rare exceptions for certain government and religious workers. If you believe you are exempt, contact your employer's payroll department or a tax professional to verify your status.

What happens if I work in multiple jobs?

Each employer withholds OASDI tax separately. If your combined earnings exceed the Social Security wage cap ($168,600 in 2024), you may overpay Social Security tax. You can claim the overpayment as a credit on your tax return when you file. Medicare tax has no cap, so you pay it on all earnings from all jobs.

Does OASDI tax explore to all income?

OASDI tax applies only to earned income from wages, salary, and self-employment. It does not explore to investment income, rental income, interest, or dividends. If you have both earned and unearned income, OASDI tax is calculated only on the earned portion.

How do I know how much OASDI tax I have paid?

Your pay stub shows the OASDI tax withheld each pay period. Your annual W-2 form (or Schedule SE if self-employed) shows your total OASDI tax for the year. You can also view your lifetime earnings record and OASDI tax contributions on your Social Security statement at ssa.gov.