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OASDI (Old-Age, Survivors, and Disability Insurance) is the formal name for the US Social Security payroll tax. Employees pay 6.2% and employers match it on wages up to the annual Social Security wage base ($176,100 in 2025). It funds Social Security retirement, disability, and survivor benefits administered by the SSA.
OASDI stands for Old-Age, Survivors, and Disability Insurance, the formal name for what most people know as the Social Security payroll tax in the United States. It is the dedicated funding source for federal Social Security benefits: retirement income for older Americans, monthly checks for disabled workers, and survivor benefits for the families of deceased wage earners.
If you have a paycheck in the United States, OASDI is one of the line items reducing your gross pay on the way to your net pay. Your employer matches your contribution dollar for dollar, and the combined amount goes to the Social Security Administration to fund current and future benefits. The portion of your earnings that OASDI applies to is known as your Social Security wages, capped at the annual wage base.
What OASDI Actually Covers
OASDI is one program with three parts, each tied to a specific kind of benefit. The “Old-Age” piece pays retirement benefits to workers who have earned enough credits and reached a qualifying age. The “Survivors” piece pays benefits to surviving spouses, dependent children, and in some cases dependent parents when an insured worker dies. The “Disability” piece pays monthly benefits to workers who become medically unable to perform substantial gainful work before reaching retirement age.
All three are administered by the Social Security Administration and funded by the same payroll tax. When people say “Social Security tax,” they almost always mean OASDI. When they see a paycheck deduction labeled “Fed OASDI/EE” or “OASDI,” that is the employee share of this tax.
OASDI Tax Rate And Wage Base
The OASDI tax rate is set by federal statute and has been 6.2% on the employee side and 6.2% on the employer side for decades. Self-employed workers pay the combined 12.4% as part of their self-employment tax (with half deductible above the line on their personal return).
OASDI applies only up to the annual Social Security wage base. Earnings above the wage base are not subject to OASDI tax for that year. The Social Security Administration adjusts the wage base each year based on the national average wage index. Recent figures: $168,600 for 2024, $176,100 for 2025. Earnings above the cap are still subject to the Medicare portion of FICA (1.45% employee plus 1.45% employer, with no cap), but they escape OASDI.
The standard breakdown on a US paycheck looks like this: 6.2% OASDI on wages up to the cap, 1.45% Medicare on all wages, and an additional 0.9% Medicare surtax on individual wages above $200,000 (employee only). The employer matches the OASDI 6.2% and Medicare 1.45% but does not match the additional Medicare surtax.
Who Pays OASDI
OASDI applies to almost every worker in the United States. Employees on a W-2 payroll have OASDI withheld at source. Independent contractors and other self-employed workers pay the full 12.4% as self-employment tax on their net earnings, reported on Schedule SE with their Form 1040.
A few categories are excluded by statute: certain state and local government employees who are covered under their state pension plan instead, members of specific religious groups that have elected out, foreign students on F-1 or J-1 visas during their initial qualifying period, and a handful of other narrow categories. The vast majority of US workers and their employers pay OASDI on every paycheck.
Paying OASDI is what builds your eligibility for Social Security retirement, disability, and survivor benefits. The Social Security Administration tracks contributions in “credits.” A worker can earn up to four credits per year, with the dollar amount required for each credit adjusted annually ($1,810 of earnings per credit in 2025). Most benefit programs require 40 credits (roughly 10 years of work) to be fully insured, though disability benefits use a different formula that is more lenient for younger workers.
The actual benefit amount you receive in retirement depends on your highest 35 years of earnings, indexed for wage growth, run through the Primary Insurance Amount formula. Years above the wage base do not count beyond the cap, which is why a higher earner’s benefit increase per dollar of additional wages drops once they exceed the OASDI cap. The system is intentionally progressive: lower earners receive a higher percentage of their pre-retirement earnings replaced by Social Security than higher earners do.
OASDI vs Medicare Tax
OASDI and Medicare are often discussed together because both are payroll taxes withheld under FICA (the Federal Insurance Contributions Act), but they fund different programs and have different rules. The table below summarizes the main differences. Read it as a quick reference, not a substitute for a tax professional’s advice on your specific situation.
| Dimension | OASDI | Medicare |
|---|---|---|
| Funds | Social Security retirement, disability, survivor benefits | Hospital insurance for seniors and disabled |
| Employee rate | 6.2% | 1.45% plus 0.9% surtax above $200,000 |
| Employer rate | 6.2% | 1.45% |
| Self-employed total | 12.4% | 2.9% plus 0.9% surtax above thresholds |
| Wage cap | $176,100 in 2025 | No cap |
| Paycheck label | Fed OASDI/EE, OASDI, or “Social Security” | Fed MED/EE or “Medicare” |
OASDI On Your Paycheck: A Quick Worked Example
A US W-2 employee with a $5,000 monthly gross salary will see the following standard FICA deductions on each paycheck (assuming year-to-date earnings stay below the wage base): 6.2% OASDI, which is $310, plus 1.45% Medicare, which is $72.50. Total FICA on that paycheck: $382.50. The employer matches the $310 OASDI and the $72.50 Medicare, sending its own $382.50 to the IRS along with the worker’s withholding.
For a higher earner crossing the OASDI cap mid-year (say a $250,000 salary), OASDI withholding stops once year-to-date wages exceed the cap. From that point through year-end, the worker continues to see Medicare withheld but no longer sees OASDI. Medicare picks up an additional 0.9% surtax once wages exceed $200,000 (filing single) or $250,000 (filing jointly).
OASDI For International Employees And EOR Arrangements
OASDI applies to wages paid for services performed in the United States, regardless of the worker’s citizenship. A non-US citizen working physically in the US on a work visa pays OASDI like any other employee. A US citizen working physically abroad for a US employer is generally still subject to OASDI under the foreign-employer rules, with totalization agreements (currently in force with about 30 countries) eliminating double-taxation in many cases.
For employers using an employer of record (EOR) to hire workers in foreign countries, the rule of thumb is straightforward: workers employed by an EOR in their home country are subject to that country’s social-security system, not US OASDI. A French national employed by your EOR in France contributes to URSSAF, not the SSA. A Brazilian national employed by your EOR in Brazil contributes to INSS. The EOR handles those local contributions; OASDI does not apply because the work is not performed in the US under a US employer relationship.
The exception is shadow payroll arrangements, where a US-domiciled worker is on assignment abroad but remains on US payroll for tax purposes. In those cases the worker may continue to pay OASDI. Tax-equalization policies and totalization agreements make the picture more complex, and large employers usually rely on global mobility tax counsel to get the structure right.
Workers near retirement often want to estimate how much OASDI they have paid and what monthly benefit they will receive. The Social Security Administration’s online portal (My Social Security at ssa.gov) shows year-by-year earnings on record, total OASDI credits earned, and projected benefit amounts at age 62, full retirement age, and age 70. Reviewing the earnings record annually is sound practice; mistakes do happen and they can reduce benefits if not corrected within the statute of limitations (currently three years, three months, and 15 days from the year of the missing earnings, with some exceptions).
The key insight for higher earners: contributing OASDI on income up to the wage cap gradually fills out your “highest 35 years of earnings” calculation. Once you have 35 years of earnings at or above the wage cap, additional OASDI contributions do not increase your monthly benefit. Many high earners hit this ceiling in their 50s or early 60s and continue to pay OASDI for years afterward without any increase in their projected retirement benefit. That is by design: OASDI is social insurance, not a personal retirement account.
Common OASDI Misconception
Several beliefs about OASDI are widely held and partly or fully wrong.
- “Social Security is going bankrupt.” The Social Security Trust Fund is projected to be depleted around 2033, but that does not mean benefits stop. After the trust fund is depleted, ongoing OASDI tax revenue would still cover roughly 77% of scheduled benefits. The political question is whether Congress raises the tax rate, raises the wage cap, raises the retirement age, or accepts the reduction.
- “My OASDI contributions go into a personal account.” They do not. OASDI is pay-as-you-go: today’s workers fund today’s retirees. Your contributions buy you eligibility for future benefits, but they are not invested in a personal account.
- “I can opt out of OASDI.” With very narrow exceptions (certain religious orders, certain state and local government employees), you cannot. Almost every US worker pays OASDI on every paycheck.
- “OASDI and FICA are the same.” FICA is the Federal Insurance Contributions Act, the umbrella statute. OASDI is one component of FICA; Medicare is the other. When you see “FICA” on a paycheck stub, it usually combines both.
How OASDI Is Reported And Remitted
Employers withhold OASDI from each paycheck and remit it to the IRS, typically through quarterly Form 941 filings (or annual Form 944 for small employers). The same form covers Medicare and federal income-tax withholding. Annual reconciliation happens through Form W-2 (showing OASDI wages and OASDI tax withheld in boxes 3 and 4) and Form W-3 transmittal.
Self-employed workers report OASDI as part of self-employment tax on Schedule SE attached to Form 1040, with the deductible half flowing to Schedule 1 as an adjustment to income. Estimated tax payments throughout the year (Form 1040-ES) cover both income tax and self-employment tax. Underpayment penalties apply if quarterly estimates fall significantly short.
Bottom Line
OASDI is the dedicated payroll tax that funds Social Security retirement, disability, and survivor benefits. Employees pay 6.2% and employers match it; self-employed workers pay both halves. The tax applies only up to the annual wage base, which the Social Security Administration adjusts each year. Paying OASDI builds eligibility for Social Security benefits over your working life, with the actual benefit amount calculated from your highest 35 years of indexed earnings. For US-domestic workers, OASDI is mandatory and almost universal. For international workers employed through an EOR in their home country, local social-security contributions replace OASDI. Understanding which side of that line your workforce sits on is essential for compliant payroll across borders.
Frequently Asked Questions
OASDI stands for Old-Age, Survivors, and Disability Insurance. It is the formal name for the US Social Security payroll tax, which funds federal retirement, disability, and survivor benefits administered by the Social Security Administration.
The OASDI tax rate is 6.2% on the employee and 6.2% on the employer side, applied to wages up to the annual Social Security wage base ($176,100 in 2025). Self-employed workers pay the combined 12.4% as part of self-employment tax, with half deductible above the line.
OASDI funds Social Security retirement, disability, and survivor benefits at 6.2% employee plus 6.2% employer, capped at the wage base. Medicare funds hospital insurance at 1.45% employee plus 1.45% employer, with no cap, plus an additional 0.9% Medicare surtax on the employee side above $200,000 of individual wages. Both are withheld together under FICA but they fund different programs.
Yes. As a 1099 contractor or self-employed worker, you pay both halves of OASDI as part of self-employment tax (12.4%), plus the full Medicare share. Self-employment tax is computed on Schedule SE attached to your Form 1040, with half of it deductible as an above-the-line adjustment to income.
OASDI withholding stops for that calendar year once your year-to-date wages exceed the Social Security wage base. From that point through December 31, you no longer see OASDI deducted, although Medicare continues. The OASDI cap resets each January.
Generally no. A worker physically located in a foreign country, employed by a local employer or by an employer of record in that country, pays into the local social-security system rather than OASDI. US citizens working abroad for US employers may continue to owe OASDI under specific rules, and totalization agreements with about 30 countries help avoid double-taxation. EOR-employed workers in their home countries do not pay OASDI; they pay the local equivalent.
No. OASDI is pay-as-you-go social insurance, not a personal retirement account. Your contributions fund current beneficiaries and build your own future eligibility, but you cannot withdraw them as a lump sum if you do not claim. Surviving spouses and eligible dependents may receive benefits based on the deceased worker's record.
Forty credits are required to qualify for Social Security retirement benefits, which is roughly ten years of work at the qualifying earnings threshold. Workers earn up to four credits per year. Disability benefits have a more lenient credit requirement that adjusts for the worker's age at the time of disability. Survivor benefits also use a different formula. Forty credits remains the headline number for retirement.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.
