What Is the OASDI Tax on Your Paycheck?

What Is the OASDI Tax?

America's OASDI tax is the Old-Age, Survivors, and Disability Insurance program, commonly known as the Social Security tax. This program from the Social Security Administration (SSA) provides monthly benefits to disabled and retired workers and their surviving spouses and dependents.

The OASDI tax is deducted from your earned income and is used to provide monthly benefits to those who've lost income due to disability, retirement, or death. The OASDI program (Old-Age, Survivors, and Disability Program) is also known as the Social Security program.

OASDI tax, along with Medicare tax, makes up the Federal Insurance Contributions Act (FICA tax), which collectively accounts for 15.3% of what you earn.

How Does the OASDI Tax Work?

The OASDI tax rate is 12.4% of your wages. If you’re an employee, the tax is split between you and your employer. This means that 6.2% is deducted from your paycheck automatically, and your employer will pay the remaining 6.2%.

OASDI tax is also subject to an income limit. This means that there’s a limit to how much of your income will be subject to this tax. You’ll pay the tax regardless of your age, even if you’re collecting Social Security and working part-time. However, once your income crosses the income threshold, you won’t have to pay more.

OASDI Taxes for the Self-Employed

If you’re self-employed, you’re responsible for paying the full 12.4% of the OASDI tax. You can have a tax professional calculate the amount for you or do it yourself. OASDI taxes are due quarterly, but you can choose to pay them monthly.

While it may seem like a big expense for self-employed individuals, you’ll be able to deduct half of the OASDI tax you paid on your income tax return. You could potentially lower your OASDI tax obligations by forming an S corporation.

OASDI Tax Rates

The 2025 OASDI tax rate is 12.4% of the employee’s gross pay. This amount is evenly split between you and your employer. This means that you’ll only pay 6.2% of your gross income to OASDI tax while your employer pays the remaining 6.2%.

OASDI Tax Withholding

OASDI tax is automatically withheld from your paycheck each pay period. This means that you won’t have to pay it separately once you receive your paycheck. The OASDI tax rate has remained the same at 12.4% since 1990.

If you’re self-employed, you’ll be responsible for paying the full 12.4% towards the OASDI tax. Taxes are due quarterly. When you file your annual tax return, you can deduct half of the tax amount you paid.

OASDI Tax Details

Below are some additional details regarding the OASDI tax.

OASDI Tax Limits

The OASDI program limits earnings subject to taxes each year. This annual limit changes each year based on the average wage index.

This annual limit is also known as the contribution and benefit base or taxable maximum. The OASDI tax limit for the year 2025 is $176,100. This means that you won’t have to pay OASDI tax on any income above $176,100.

OASDI Tax Deductions

As we’ve mentioned above, the OASDI tax liability is 6.2% in 2025 if you’re an employee and 12.4% if you’re self-employed.

Self-employed workers can claim a deduction for half of the OASDI tax they pay. However, if you’re an employee, there are no deductions or credits to reduce your tax liability because employers pay half of your obligation.

It's important to note that this tax rate can change from new legislation.

Can You Opt Out of the OASDI Tax?

OASDI tax is mandatory in most cases, so you won’t be able to opt-out. However, you won’t have to pay Social Security tax on any income above the 2025 taxable maximum of $176,100.

There may be some exceptions where you won’t have to pay an OASDI tax:

• If you’re self-employed and earn less than $400.
• Some religious groups are exempt, but they must obtain approval from the IRS and waive their rights to any future benefits.
• Some non-immigrant and non-resident aliens may be exempt depending on their visa, including foreign students, foreign government employees, foreign academic professionals, and researchers.
• State and local government employees may be exempt if they’re only covered by their local or state pension plan.

OASDI Taxes Fund Social Security

The OASDI tax deducted from your paycheck provides Social Security benefits to millions of retirees and individuals with disabilities. You can also start collecting benefits for yourself once you reach the age of 62 and have paid into the system for at least 10 years.

If you’re self-employed, you’ll need to pay more than employed workers. However, self-employed individuals can also claim deductions for half of the tax they paid.

There aren’t many exemptions from OASDI tax, and they’re not easily approved. The Social Security system works best when most American workers pay into the system.

Keep in mind that even if you receive Social Security when you retire, the benefit amount typically won’t be enough to cover your retirement expenses. That's why it’s important to start retirement planning as soon as you start working.

Consider opening a Simplified Employee Pension Individual Retirement Account or SEP IRA, which allows self-employed individuals and small business owners to set aside money for retirement with tax advantages, helping to ensure a more secure financial future.

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