The OASDI tax—short for Old-Age, Survivors, and Disability Insurance—is a federal payroll tax that plays a vital role in funding Social Security benefits for millions of Americans. It appears on every paycheck and is part of a broader system that ensures financial security for retirees, the disabled, and survivors of deceased workers.
What Is OASDI Tax?
The OASDI tax is a portion of the Federal Insurance Contributions Act (FICA) tax. It funds the U.S. Social Security program, which provides benefits for retirees, people with disabilities, and the families of deceased workers. Employees and employers each contribute 6.2% of wages (totaling 12.4%) up to an annual wage limit ($176,100 in 2025). Self-employed individuals pay the full 12.4% under the Self-Employment Contributions Act (SECA).
Is OASDI Tax Mandatory?
Yes, OASDI tax is generally mandatory for most workers in the United States. However, there are a few exceptions:
- Self-employed individuals with net earnings under $400 per year
- Certain religious groups or clergy who have opted out using IRS forms
- Non-resident aliens on specific visas, and
- State/local government employees in retirement systems not covered by Social Security
Most U.S. wage earners will be required to contribute.
How Does Medicare Tax Relate?
The Medicare tax, which is the second component of FICA, is 1.45% of all wages (with no income cap). Employers match this amount. High earners pay an additional 0.9% Medicare tax on income above $200,000, which employers are not required to match.
Combined FICA tax:
- Employees: 7.65% (6.2% OASDI + 1.45% Medicare)
- Employers: 7.65%
- Self-employed: 15.3% total (OASDI + Medicare)
Do I Get My OASDI Tax Back?
You don’t get the tax “refunded” like income tax, but:
- Social Security benefits are paid out later in life (retirement, disability, or survivors benefits), based on your contribution record.
- If you have overpaid Social Security tax—for instance, by having multiple jobs that together exceed the wage cap—you can claim the excess on your income tax return.
- Self-employed individuals may deduct half of their self-employment tax from their taxable income.
When Did OASDI Tax Start?
The OASDI tax traces its origins to the Social Security Act of 1935. Payroll tax collections began in 1937, with both employers and employees initially contributing 1%. The Disability Insurance (DI) portion was introduced in 1956, adding to the structure of benefits we recognize today.
What Is OASDI Tax on My Paycheck?
On every paycheck, the OASDI tax appears as a deduction:
- 6.2% of your gross wages is withheld, up to the annual cap ($176,100 in 2025).
- Your employer contributes an equal amount.
- In addition, 1.45% is withheld for Medicare, with no wage limit.
For high earners, the 0.9% Additional Medicare Tax applies to wages exceeding $200,000 (individual filers).
Example:
If you earn $100,000 in 2025:
- OASDI: 6.2% → $6,200
- Medicare: 1.45% → $1,450
Total withheld from your paycheck: $7,650
Your employer pays another $7,650 separately.
Summary Table
|
Category |
Detail |
|
Mandatory? |
Yes (with limited exceptions) |
|
Employee OASDI Rate |
6.2% (up to $176,100 wage cap) |
|
Medicare Rate |
1.45% (no cap) |
|
Employer Match |
Yes (6.2% OASDI + 1.45% Medicare) |
|
Self-employed Rate |
12.4% OASDI + 2.9% Medicare (deductible) |
|
Refund Possibility |
For overpayments or via Social Security later |
|
Tax Introduced |
1937 (OASDI); 1956 (Disability added) |
Conclusion
OASDI tax is not just a deduction—it’s an investment in your future financial safety net. It funds essential programs that support Americans during retirement, after life-altering disability, or following the loss of a family breadwinner. While mandatory for most, it offers long-term benefits and protections that make it one of the most important elements of the U.S. tax and welfare system.
