The Old-Age, Survivors, and Disability Insurance program, commonly referred to as OASDI or simply Social Security, offers financial assistance to individuals who are retired, have a disability, or are surviving family members of deceased workers. OASDI, along with Medicare, comprises the taxes collected under the Federal Insurance Contributions Act (FICA), which amounts to a combined payroll tax of 15.3%.
How OASDI Works in Payroll
A total of 6.2% of an employee’s wages is allocated toward the OASDI portion of FICA. Employers are required to match this amount, meaning 12.4% in total is submitted to the federal government to fund the Social Security system. Businesses using payroll platforms like Beyond can automate this process, ensuring timely and accurate withholding.
For self-employed individuals, OASDI responsibilities are doubled, they’re responsible for the full 12.4% themselves since there is no employer to split the tax burden.
Who Qualifies for OASDI Benefits?
To be eligible for OASDI benefits, individuals need to earn sufficient work credits based on their employment history. Typically, 40 credits are required to qualify for retirement or survivor benefits. In 2024, one credit is earned for every $1,730 in wages, with a maximum of four credits awarded per year. This threshold may adjust annually due to inflation.
OASDI vs. Social Security: Is There a Difference?
While the terms OASDI and Social Security are often used interchangeably, they refer to the same federal program. Employees reviewing their pay stubs may notice a line labeled “OASDI”—this represents the Social Security tax deducted from their earnings.
However, OASDI should not be confused with SSI (Supplemental Security Income), which is designed for seniors or individuals with disabilities who have limited income. While some people qualify for both programs, they serve different purposes and have separate eligibility criteria.
What Is the Maximum OASDI Tax?
There is an annual earnings cap for OASDI contributions, referred to as the taxable wage base. For 2025, the limit is set at $176,100. This means that any earnings above this amount are not subject to the 6.2% OASDI tax. Consequently, the maximum OASDI tax an employee would pay in 2025 is $10,918.20. This limit typically increases each year to adjust for inflation.
Is Paying OASDI Tax Required?
In most cases, yes—OASDI taxes are mandatory for employees in the U.S. workforce. However, there are specific exemptions. Certain groups are not obligated to pay Social Security tax and, as a result, do not qualify for future benefits. These include:
- Members of recognized religious sects such as the Amish or Mennonites
- Nonresident aliens working in the U.S. under specific conditions
- Students working at the same institution they attend
- Employees of foreign governments
Handling OASDI with Payroll Software
Modern payroll systems, like those offered by Beyond, typically handle OASDI calculations automatically. These platforms also manage other tax obligations including Medicare, federal income tax, FUTA (Federal Unemployment Tax Act), and state and local taxes. This automation helps employers remain compliant while saving time and minimizing errors.