OASDI is the Social Security portion of your FICA paycheck deduction

OASDI stands for Old-Age, Survivors, and Disability Insurance. It is the Social Security program, and the OASDI tax is the portion of your FICA deduction that funds it. When you see "Social Security" listed on your pay stub, that line item is your OASDI contribution. Your employer matches it dollar-for-dollar.

FICA itself has two parts: OASDI (Social Security) and Medicare. Most people know FICA as one combined deduction, but the two programs are separate. Your OASDI tax rate is 6.2 percent of your wages, up to a wage cap that changes each year. Once you earn past that cap in a calendar year, OASDI tax stops; Medicare tax continues on all wages above it.

The money you pay into OASDI now does not sit in an account with your name on it. Instead, it funds benefits for people currently receiving Social Security: retirees, disabled workers, and surviving family members of workers who have died. When you retire or become unable to work, your own benefits come from the OASDI taxes that workers are paying then.

Key Takeaways

  • OASDI is Social Security, the retirement and disability insurance program funded by the 6.2 percent tax on your paycheck.
  • Your OASDI tax stops once you reach the annual wage cap, which varies by year, but Medicare tax continues on all remaining wages.
  • OASDI funds three types of benefits: retirement payments for workers over a certain age, disability payments for workers unable to work, and survivor benefits for family members of deceased workers.
  • The money you pay in OASDI tax funds current beneficiaries, not a personal account; your own future benefits will come from taxes paid by workers at that time.

Who receives OASDI benefits

OASDI benefits go to three groups. The largest group is retired workers—people who have worked long enough and reached their full retirement age or chosen to claim early. The second group is disabled workers under retirement age who have a medical condition expected to last at least 12 months or result in death. The third group is family members of deceased workers: a surviving spouse, children under 19 (or 19 if still in high school), and sometimes a parent who depended on the worker.

To receive any OASDI benefit, you must have earned enough work credits. A work credit is tied to your wages in a calendar year; the threshold changes annually. Most people need 40 work credits total to receive retirement benefits, though disabled workers and their family members may need fewer. You can earn a maximum of four credits per year, so 40 credits typically takes 10 years of work.

How the OASDI wage cap works

Each January, the Social Security Administration sets a new wage cap—the maximum amount of earnings subject to OASDI tax that year. In 2024, that cap was $168,600. This means if you earn $168,600 or more in 2024, you pay OASDI tax only on the first $168,600 of your wages. Any income above that is not subject to OASDI tax.

The wage cap rises most years because it is tied to national average wage growth. If you change jobs mid-year, you may pay OASDI tax to more than one employer on the same wages if your combined earnings exceed the cap. When that happens, you can claim the overpayment as a credit on your federal income tax return; you do not get a refund, but the credit reduces your tax owed.

Medicare tax, by contrast, has no wage cap. You pay 1.45 percent Medicare tax on all your wages, no matter how much you earn. High earners also pay an additional 0.9 percent Medicare tax on wages above $200,000 (single) or $250,000 (married filing jointly).

The difference between OASDI and SSI

OASDI and SSI (Supplemental Security Income) are often confused because both involve Social Security, but they are different programs with different funding sources and rules. OASDI is funded by payroll taxes—the FICA deduction from your check. SSI is funded by general federal tax revenue and is a needs-based program for people with low income and few resources.

To receive OASDI, you must have worked and earned work credits. To receive SSI, you do not need work history; instead, you must meet income and resource limits. A person can receive both OASDI and SSI at the same time if their OASDI benefit is very small, but the two programs operate independently. When you see "Social Security" on a pay stub, it refers to OASDI, not SSI.

What happens to OASDI taxes you pay

The OASDI tax you pay goes into the Social Security Trust Fund, a federal account that holds reserves. The trust fund pays out benefits to current beneficiaries. In years when tax revenue exceeds benefit payments, the surplus builds the reserve. In years when benefit payments exceed tax revenue, the reserve covers the difference.

The trust fund's reserves are invested in special U.S. Treasury bonds that earn interest. This interest is also part of the fund's income. The Social Security Administration publishes an annual report on the trust fund's status, including projections about when reserves may be depleted if no changes are made to tax rates or benefit formulas.

Self-employed workers and OASDI

If you are self-employed, you pay both the employee and employer portions of OASDI tax, for a total of 12.4 percent of your net self-employment income. You report this on Schedule SE (Self-Employment Tax) when you file your federal income tax return. The self-employment tax is calculated on net earnings from self-employment after you deduct half of the self-employment tax itself.

Self-employed workers also pay Medicare self-employment tax at 2.9 percent (plus the additional 0.9 percent if income is high enough), for a total of 3.8 percent or more. Like employees, self-employed workers can deduct half of their self-employment tax as a business expense on their tax return, which reduces their taxable income.

How OASDI benefits are calculated

Your OASDI benefit amount is based on your highest 35 years of earnings. The Social Security Administration adjusts your past earnings for wage growth, then calculates your Primary Insurance Amount (PIA)—the benefit you receive at your full retirement age. If you claim before full retirement age, your benefit is reduced. If you delay claiming past full retirement age, your benefit increases by a percentage for each year you wait, up to age 70.

The formula that converts your earnings history into a monthly benefit is progressive: it replaces a higher percentage of lower earnings and a lower percentage of higher earnings. This means lower-wage workers receive a higher replacement rate than higher-wage workers. Your actual benefit also depends on your age when you claim and whether you are still working.

Frequently Asked Questions

Is OASDI the same as Social Security?

Yes. OASDI is the official name for the Social Security program. When you see "Social Security" on your pay stub or hear it in conversation, it refers to OASDI—the retirement, disability, and survivor insurance program funded by the 6.2 percent payroll tax.

What is the OASDI wage cap and why does it exist?

The OASDI wage cap is the maximum amount of earnings subject to OASDI tax each year. In 2024, it was $168,600. The cap exists to limit the total OASDI tax burden on high earners and to keep the program's benefit formula progressive—higher earners do not pay tax on all their income, but their benefits are also capped.

Can I get back the OASDI taxes I paid if I don't claim benefits?

No. OASDI taxes are not refundable. If you die before claiming benefits, your family members may be able to receive survivor benefits based on your work record, but you cannot recover the taxes you paid. The program is insurance, not a savings account.

Do I pay OASDI tax on all my income?

No. You pay OASDI tax only on wages up to the annual wage cap. In 2024, the cap was $168,600. Income above that cap is not subject to OASDI tax, though it is still subject to Medicare tax and federal income tax.

What is the difference between my OASDI benefit and my work credits?

Work credits determine whether you are may be able to access for OASDI benefits at all. Your benefit amount is calculated separately, based on your highest 35 years of earnings. You need 40 work credits to receive retirement benefits, but the amount you receive depends on how much you earned during those years.