What is Old-Age, Survivors, and Disability Insurance (OASDI tax)?

Old-Age, Survivors, and Disability Insurance and OASDI meaning

Old-Age, Survivors, and Disability Insurance (OASDI), commonly known as Social Security, provides financial support to Americans who have lost income as a result of retirement, disability, or death. OASDI and Medicare are two of the taxes that make up the Federal Insurance and Contributions Act (FICA). Together, these payroll taxes equal 15.3%.

Who is eligible for OASDI benefits?

In general, eligibility for OASDI benefits depends on how long an employee has worked and the “work credits” they accumulate. For example, once a worker has 40 credits, they’re entitled to the benefits. Employees can earn a maximum of four credits in a single year. In 2025, $1,810 is required for a credit. However, this number is not set in stone and changes annually.

Is there a difference between Social Security and OASDI?

Though many think there’s a difference between each of these terms, Social Security and OASDI refer to the same program. When your employees review their pay stub, they’ll likely notice an OASDI deduction, which means they paid their Social Security taxes.

However, OASDI and Supplemental Security Income (SSI) are different as SSI is for individuals who are at least 65 with limited income and a disability. While those who are eligible for SSI are likely also eligible for OASDI, not everyone who qualifies for OASDI also qualifies for SSI.

What is the difference between OASDI and SDI?

OASDI and SDI are completely separate programs with different purposes.

• OASDI is a mandatory federal tax that applies to workers nationwide.
• SDI (State Disability Insurance) is a state-level tax required only in a handful of states (such as California, New Jersey, and New York) to fund short-term state disability programs.

What’s the OASDI limit for 2026 and 2027?

Also known as the taxable wage base, the OASDI limit is the maximum dollar amount an employee’s gross wages are subject to tax in a given calendar year. This means once an employee earns above this threshold, the 6.2% deduction stops for the remainder of the year. The table below shows recent caps and the projected number for 2027.

Keep in mind: The 2027 figure is a projection from the Board of Trustees of the Social Security Trust Fund based on their 2026 annual report. When the official number is released, we will add it here.

Are OASDI taxes mandatory?

Most US workers are required to pay OASDI, but there are a few exemptions.

• Some student workers: Students employed by the college or university they actively attend.
• Family employment: Children under age 18 employed in a parent’s sole proprietorship or partnership.
• Low-income in self-employment: Self-employed individuals with net annual earnings under $400.
• Religious exemptions: Members of some religious sects (such as the Amish or Mennonites) that have a formal exemption.
• Certain government employees: State and local government workers covered by alternative public pension systems, or federal civilian employees hired before January 1, 1984.

Most payroll software will calculate OASDI tax for you out of the box. You can also count on it to take care of state and local taxes, federal income tax, Medicare, and federal unemployment tax (also known as FUTA).

How does OASDI work for the self-employed (SECA vs. FICA)?

For W-2 employees, OASDI is collected under the Federal Insurance Contributions Act (or FICA), meaning the cost is split evenly (6.2% each) between the employee and the employer. If you’re an independent contractor, freelancer, or sole proprietor, your taxes fall under the Self-Employment Contributions Act (SECA). The difference is that you act as both the employee and the employer and are responsible for the full 12.4% OASDI tax rate. That said, when filing your federal tax return, you can deduct half of your self-employment tax to offset this responsibility.