The OASDI tax—short for Old-Age, Survivors, and Disability Insurance—is a familiar deduction on most paychecks, but many employees and even business owners aren’t fully clear on what it funds or how it operates. While most people know it as Social Security, OASDI is the formal term used by the Social Security Administration (SSA) to describe the system that provides retirement, survivor, and disability benefits to workers and their families.
If you're managing payroll or trying to explain deductions to your employees, understanding OASDI is essential. Let’s break down what it means, how much it costs, and why it matters to both employers and workers.
OASDI stands for Old-Age, Survivors, and Disability Insurance—a federal program that’s been in place since 1935. It provides monthly benefits to retired workers, survivors of deceased workers, and individuals with qualifying disabilities.
OASDI is funded through payroll taxes, which are deducted from employee wages and matched by employers. These contributions are pooled into trust funds managed by the SSA, which distributes payments to eligible beneficiaries.
Yes. OASDI is simply the formal name for the Social Security program. If you see “OASDI” on a pay stub or tax document, it means the same thing as Social Security.
This tax is different from Supplemental Security Income (SSI). SSI is a separate program that provides additional support to individuals who are elderly or disabled and have limited income or resources. It’s possible to qualify for both SSI and OASDI, but they are funded and administered differently.
OASDI taxes are mandatory for most employees and employers in the United States. Here’s how the tax is structured:
In 2025, only the first $176,100 of an employee’s wages are subject to this tax. Once a worker earns more than that amount in a calendar year, no further OASDI tax is deducted for the remainder of the year.
To qualify for OASDI benefits, a person must earn “work credits” over time. As of 2025, a worker earns one credit for every $1,810 in wages, up to four credits per year. After accumulating 40 credits, the worker becomes fully insured and eligible for retirement benefits.
There are three main benefit types:
To qualify, individuals must:
The monthly benefit amount is calculated based on the worker’s average indexed monthly earnings (AIME) over their 35 highest-earning years.
Survivors of deceased workers—such as spouses, children, or dependent parents—may qualify for monthly payments if the deceased met minimum work requirements. The benefit amount is based on the deceased’s earning record and the survivor’s relationship to them.
Workers who are unable to continue working due to a qualifying medical condition can apply for disability benefits. Eligibility depends on both:
The monthly benefit is again based on the worker’s historical income.
Freelancers and business owners are required to pay both the employee and employer portions of the tax, totaling 12.4% of net earnings. This can add up quickly, but it ensures they are contributing to the Social Security system and earning credits toward future benefits.
Certain visa holders may be exempt from OASDI taxes, including:
Employers should carefully review an employee’s visa status to determine whether they’re required to pay OASDI.
OASDI isn’t just a tax—it’s a critical part of the social safety net in the United States. Most American workers will rely on Social Security at some point in their lives, whether it’s for retirement income, support after a spouse’s death, or disability benefits after an unexpected illness or injury.
For employers, OASDI is a key part of payroll tax compliance. Failing to withhold or remit OASDI taxes can result in penalties, audits, or legal issues. Keeping payroll systems up to date, especially when wage limits and thresholds change each year, is essential for staying compliant.
Here are the latest figures as of 2025:
These numbers are updated annually by the SSA to reflect wage inflation, so it’s important for HR teams and payroll providers to monitor changes each year.
OASDI is more than a line item on a pay stub—it’s the foundation of America’s Social Security system. For most employees, it’s a lifelong contribution that leads to financial protection in retirement, or after a loss or disability. For employers, it’s a non-negotiable part of payroll tax compliance that must be managed accurately and efficiently.
If you're a business leader or HR professional looking to simplify and streamline how you manage OASDI and other payroll taxes, it’s time to consider upgrading your payroll partner.
Paypro helps businesses handle payroll taxes with confidence. From automatic OASDI withholding to real-time updates when wage limits change, Paypro’s technology and support keep you compliant and stress-free. Whether you're paying employees across multiple states or just need help managing your obligations as a self-employed owner, we’ve got you covered.
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