What is OASDI Tax?

This is a common question for employees and employers who notice deductions on their paychecks. OASDI stands for Old-Age, Survivors, and Disability Insurance, which is a core part of the U.S. Social Security system. At L&Y Tax Advisor, we help individuals and businesses understand payroll taxes clearly and accurately. Explore more: What is OASDI Tax?

Understanding OASDI Tax

OASDI tax is a federal payroll tax collected under the Federal Insurance Contributions Act (FICA). It funds Social Security benefits for retirees, disabled individuals, and surviving family members of deceased workers.

Both employees and employers contribute a fixed percentage of wages toward this tax, ensuring long-term financial protection for eligible beneficiaries.

How OASDI Tax Works

The OASDI tax is calculated as a percentage of earned income, up to an annual wage limit set by the government.

Key points include:

  • Employees pay 6.2% of their gross wages

  • Employers also pay 6.2% on behalf of employees

  • Self-employed individuals pay the full 12.4%

  • The tax applies only up to the annual wage base limit

At L&Y Tax Advisor, we ensure that payroll calculations comply with current tax laws and reporting requirements.

Why OASDI Tax Is Important

OASDI tax plays a vital role in social welfare and financial stability. It ensures income support for millions of Americans who rely on Social Security benefits.

Benefits funded by OASDI tax include:

  • Retirement income

  • Disability benefits

  • Survivor benefits for families

  • Cost-of-living adjustments

Who Must Pay OASDI Tax?

Most workers in the U.S. are required to pay OASDI tax, including:

  • Full-time and part-time employees

  • Self-employed professionals

  • Temporary and contractual workers (with limited exceptions)

Certain government employees and specific visa holders may be exempt.

FAQs

Q1: What is OASDI Tax?
 OASDI tax is a payroll tax that funds Social Security retirement, disability, and survivor benefits.

Q2: Is OASDI tax the same as Social Security tax?
 Yes, OASDI tax is commonly referred to as Social Security tax.

Q3: Can I get a refund on OASDI tax?
 Refunds may apply in limited cases, such as overpayment or multiple employers.

Q4: How can L&Y Tax Advisor help?
 L&Y Tax Advisor provides expert guidance on payroll taxes, compliance, and employee deductions.

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