When you look at your pay stub, you’ll often see a line labeled OASDI on paycheck. What is OASDI tax and what OASDI tax meaning is? It stands for Old Age, Survivors, and Disability Insurance. It is an important part of the Social Security Administration program in the United States. It’s a federal tax that most employees see deducted from their paychecks. This tax helps fund important benefits such as retirement income, disability support, and survivors’ benefits for workers and their families.
In this article, we’ll explain OASDI definition, what is OASDI deduction, what it means when you see it on your paycheck, and discuss how it fits into the broader Social Security system.
Why OASDI Appears on Your Pay Stub?
Employee OASDI on pay stub is a separate deduction from other taxes like federal income tax, Medicare, and California state taxes. It is typically labeled as “OASDI” or simply “Social Security Tax.” Seeing this OASDI payroll deduction can help you track how much you’re contributing to the Social Security system over time.
For example, if you earn $4,000 a month, 6.2% of that, or $248, will be deducted as OASDI each month. By the end of the year, you’ll have contributed $2,976 towards Social Security.
Where Does the Money Go?
You can think of employee OASDI taxes as a long-term investment in your financial security. The funds collected through OASDI deductions go into the Social Security Trust Fund to pay benefits to retirees, disabled individuals, and surviving family members. Your pre-tax contributions today help support current beneficiaries, while future benefits will be funded by the next generation of workers. OASDI helps build eligibility for Social Security benefits when you retire, become disabled, or for survivors’ benefits in case of death.
Old-Age (Retirement) Benefits
The Old-Age benefits part of OASDI refers to the retirement benefits that workers receive after they have reached the qualifying age and have paid into the Social Security system through their working years. When employees contribute to OASDI, they are building their eligibility for these retirement benefits. Once you reach the full retirement age, you can start receiving monthly Social Security checks that are calculated based on your earnings over your career.
Survivors’ Benefits
Survivor benefits are provided to the family members of deceased workers. If a worker who has paid into the Social Security system passes away, their spouse, children, and even dependent parents may be eligible to receive survivors’ benefits. These payments help provide financial security to family members who rely on the deceased worker’s income.
Disability Benefits
Disability Insurance is for individuals who are unable to work due to a severe disability. If a person becomes disabled and cannot continue earning a living, OASDI provides monthly disability payments to support them financially. These payments are based on the worker’s prior contributions to the Social Security system, and the disability must meet specific criteria set by the Social Security Administration (SSA) to qualify for Disability Benefits.
Is OASDI Tax Mandatory?
Yes, the OASDI tax is mandatory for most employees in the United States, including those in California. It is a federal payroll tax that both employees and employers are required to pay to fund the Social Security system. This means that if you are employed and receive social security wages, a portion of your paycheck will automatically be deducted for OASDI.
Who Pays OASDI Tax?
OASDI is mandatory for most employees working in the United States, including those in California. But who pays into Social Security? If you receive a regular paycheck, you are required by federal law to contribute to the Social Security system. Employers are responsible for withholding OASDI from employees’ paychecks and submitting both employee and employer contributions to the Social Security Administration.
Are There Exemptions from OASDI?
While the OASDI tax is mandatory for most workers, there are some social security exemptions for specific groups of individuals. These exemptions are often influenced by California salary law, which governs the taxation and benefits of certain job categories.
Religious Organizations
Certain members of religious groups may qualify for an exemption from paying into Social Security, provided they are part of a recognized religious sect that holds a conscientious objection to receiving healthcare or retirement benefits through private plans.
Students and Young Workers
Students employed by their university are exempt from Social Security taxes, but only for income earned through that job; other jobs are fully taxable. Medical residents also qualify. However, university employees who later enroll as students are not exempt. Additionally, children under 18 working in a family-owned business and individuals under 21 doing domestic work, such as housekeeping or babysitting, are not required to pay Social Security taxes. However, these exemptions still require employers to follow minimum wage laws and ensure employees are paid at least the legal hourly rate.
Public Sector Workers
Initially, state and local employees were exempt from Social Security taxes due to their participation in government pension plans. Today, most public employees pay into Social Security, but exceptions remain for those in comparable government pension plans. Additionally, federal workers, including long-serving members of Congress who began their service before 1984, are covered under a different retirement plan and are exempt from Social Security taxes.
Foreign Governments Workers and Nonresident Aliens
Nonresident aliens, including most individuals living and working in the U.S. without citizenship or legal residency, are generally required to pay Social Security taxes, even when employed by foreign companies. Exceptions include temporary visa holders, such as educators, scholars, and some international students working in the U.S. Employees of foreign governments conducting official duties are also exempt. However, their family members and domestic workers, like nannies, must pay Social Security taxes unless they also work for the foreign government.
High-Income Earners
High-income earners are not fully exempt from Social Security taxes, but only a portion of their income is taxed. In 2025, earnings above $176,100 are exempt from Social Security taxes. For instance, someone earning $300,000 will pay 6.2% on only $176,100, amounting to $10,918.20, with their employer matching this amount. Those earning exactly $176,100 will pay the same in Social Security taxes.
If you fall into one of these exempt categories, your wages may not be subject to OASDI tax. However, for most employees, the OASDI tax is mandatory and deducted automatically from social security wages.
How OASDI is Calculated and Tax Rate?
In 2025, OASDI taxes are calculated based on the worker’s highest 35 years of indexed earnings, with the Social Security Administration (SSA) applying a formula that incorporates progressive bend points. The OASDI tax rate for social security wages paid in 2025 is set at 6.2% for both employees and employers. Therefore, an individual earning $176,100 or more would contribute $10,918.20 to the OASDI program, with their employer matching that contribution. The final benefit amount is also influenced by the worker’s age at which benefits begin, including adjustments for early or delayed retirement.
For example, if you earn $50,000 per year, $3,100 (6.2% of $50,000) will be deducted from your paycheck over the course of the year as your OASDI contribution. Your employer will also contribute the same amount to you.
What is the Social Security Wage Base in 2025?
In 2025, the Social Security wage base is $176,100. This means OASDI tax is only applied to the first $176,100 of your annual earnings. For example, if you earn $200,000, you’ll pay 6.2% OASDI tax on $176,100, totaling $10,917.20. After reaching this threshold, no further OASDI tax will be deducted, but Medicare tax will continue to apply to all your earnings.
What Happens If You Have Multiple Jobs?
If you work multiple jobs and your combined earnings from all employers exceed the wage base limit of $176,100 , you may hit the OASDI limit, as each employer will deduct OASDI based on the social security wages they pay you. In such cases, you can claim a refund of the excess OASDI contributions when you file your federal income tax return. The excess amount paid will be credited back to you as part of your overall tax filing.
What Is The Difference Between OASDI and CASDI?
When looking at your paycheck, you might notice various payroll taxes, including OASDI and CASDI (California State Disability Insurance). Although they both appear as deductions on your pay stub, they serve different purposes and are managed by separate government entities. Understanding the key differences between OASDI and CASDI can help clarify how these payroll taxes function and what benefits they provide.
The main differences between OASDI and CASDI lie in their scope, purpose, and jurisdiction. OASDI is a federal tax that funds the Social Security program, providing benefits for retirees, survivors, and individuals with disabilities across the United States. It applies to all U.S. workers, regardless of their state of residence. On the other hand, CASDI is a state-specific tax that supports California’s Disability Insurance (DI) and Paid Family Leave (PFL) programs, offering benefits to workers who experience temporary disabilities or need to care for family members. CASDI only applies to employees working in California, even if they are not residents of the state. Additionally, OASDI has a wage base limit, meaning earnings above a certain threshold are not taxed for OASDI, while CASDI does not have such a limit and taxes all applicable wages up to a set cap.
