What Is OASDI Tax?

Curious about those taxes on your paycheck and wonder what they’re for? One of them is OASDI tax, which for some workers might be a significant chunk of their pay.

Here’s how the OASDI tax works.

What is OASDI tax?

The OASDI (Old-Age, Survivors, and Disability Insurance) tax is applied to earned income and provides financial support to those who have lost income due to retirement, disability or death.

The OASDI program, more commonly known as Social Security, is one of two taxes that make up the Federal Insurance and Contributions Act (FICA). The other is a Medicare tax. Collectively, these two payroll taxes amount to 15.3%.

» Learn more: How FICA taxes work on your paycheck

How does OASDI tax work?

The OASDI tax rate is 12.4% of wages up to a certain income limit. This means that there’s a limit to how much of your income can be subject to OASDI taxes.

If you’re an employee, the OASDI tax is split evenly between you and your employer. This means that 6.2% is automatically deducted from your paycheck, and your employer pays the other 6.2%. It’s considered an additional expense for your employer and won’t be further deducted from your pay.

» MORE: How other types of withholding taxes are calculated

How does OASDI tax work if I’m self-employed?

If you’re self-employed, you’ll pay both the employee and employer portions of the OASDI tax. That means you’re responsible for the full 12.4% and will have to calculate it yourself (or with the help of a tax pro). OASDI taxes can be paid as often as monthly but are due quarterly. Paying taxes late could result in a bigger tax bill, along with penalties and interest.

While it’s a little extra work, there’s some good news for entrepreneurs: You’re able to deduct half the OASDI tax paid on your annual tax return. Other options, such as forming a single-member LLC or S-corporation, could also help lower your OASDI tax.

» MORE: Other self-employment tax deductions

What is the OASDI limit in 2023?

The OASDI limit in 2023 is $160,200, up from $147,000 in 2022. This is also called the taxable maximum, meaning that any income above this limit will not be subject to OASDI taxes.

What is the OASDI limit in 2024?

The OASDI limit in 2024 is $168,600, up $8,400 from 2023. This means that employees will contribute at most $10,453.20. The maximum for self-employed people will be $20,906.40^[0]

Is the OASDI tax mandatory?

The OASDI tax is mandatory for most people, but there are exceptions. Any income above the taxable maximum is not subject to the Social Security tax. Those who are self-employed and make less than $400 per year are also exempt^[0]

Local and state government employees are also exempt if they’re only covered by their state or local pension plan. Certain nonimmigrant and nonresident aliens, depending on the type of visa held, are also granted exemptions. This includes foreign students, researchers and academics at universities, as well as foreign government employees working in the U.S.

Certain religious groups are exempt from Social Security and Medicare taxes, but individuals need to file Form 4029 and receive approval from the IRS. Doing this also waives their right to benefits in the future^[0]

» Dive deeper: What does it mean to be tax exempt?

Is OASDI tax the same thing as Social Security tax?

Yes, OASDI is commonly called Social Security, and so the Social Security tax also refers to the OASDI tax.

Can I get my Social Security tax back if I’ve overpaid it?

Maybe. This could happen under certain circumstances, such as if you work two jobs and the combined income is above the annual taxable maximum. In this scenario, both of your employers may have withheld too much of your pay for Social Security tax.