OASDI tax: A complete guide for employers and HR teams

If you’ve ever glanced at a pay stub and wondered what “OASDI” or “Fed OASDI/EE” means—or why a chunk of every paycheck disappears into it—this guide has the answers. OASDI (Old-Age, Survivors, and Disability Insurance) tax is one of the two components of FICA withholding, commonly known as Social Security tax. For HR and payroll teams, understanding exactly how it works, who pays it, what the current limits are, and how to calculate it correctly is essential for staying compliant and answering employee questions accurately.

What is OASDI tax?

OASDI tax—also called Social Security tax—is a mandatory federal payroll tax deducted from employees’ earned income and matched by employers. It funds the Social Security program, which provides financial benefits to retired workers, people with certain disabilities, and the surviving family members of deceased workers.

OASDI is one of the two parts of FICA (Federal Insurance Contributions Act) taxes—the other being Medicare tax. Together, they make up the full FICA withholding on an employee’s paycheck. The combined employee FICA rate is 7.65% (6.2% OASDI + 1.45% Medicare), and employers match that 7.65% separately.

What does OASDI tax cover?

OASDI contributions flow into two Social Security trust funds managed by the SSA, which pay out three types of benefits:

• Retirement benefits: 85% of OASDI tax goes into a trust fund that pays monthly retirement benefits to workers who have earned at least 40 work credits (roughly 10 years of covered employment) and are at least 62 years old. The SSA uses your highest 35 years of earnings to calculate your monthly benefit amount—so the more you earn over your career, the higher your eventual payment. One important trade-off: claiming benefits before your Full Retirement Age results in permanently reduced monthly payments; waiting until FRA (or beyond, up to age 70) increases them.

• Disability benefits: 15% of OASDI tax funds the Social Security Disability Insurance (SSDI) program, which provides benefits to qualifying workers and their family members who can no longer work due to a qualifying medical condition.

• Survivors benefits: If a covered worker dies, monthly Social Security benefits are paid to surviving spouses and dependent children. The amount is a percentage of the deceased worker’s basic Social Security benefit, based on their lifetime earnings.

• Program administration: A small portion (approximately 0.5% of annual Social Security benefits) covers the administrative costs of running the program.

OASDI vs. Medicare: Understanding FICA

OASDI and Medicare are both components of FICA withholding, but they work differently. OASDI (Social Security) is 6.2% for both employee and employer and applies only up to an annual wage base limit—$184,500 in 2026. Once an employee’s year-to-date wages hit that cap, OASDI withholding stops for the rest of the year.

Medicare tax is 1.45% for both employee and employer and has no wage cap—it applies to every dollar earned all year. High earners above $200,000 also pay an additional 0.9% Additional Medicare Tax, which is not matched by the employer.

How does the OASDI tax work?

Employers are required by FICA to automatically withhold 6.2% OASDI tax from each employee’s paycheck and contribute a matching 6.2%, for a combined total of 12.4%. The 6.2% rate has remained unchanged since 1990, set by federal statute.

The federal government sets an annual wage base limit (also called the taxable maximum)—the maximum amount of an employee’s earnings subject to OASDI in a given year. Once an employee’s cumulative wages for the year exceed this cap, OASDI withholding stops entirely for the remainder of the year. Medicare withholding continues with no cap.

The wage base is adjusted annually by the SSA based on changes in the National Average Wage Index. Current and recent limits:

• 2026: $184,500 (maximum employee contribution: $11,439)

• 2025: $176,100 (maximum employee contribution: $10,918.20)

• 2024: $168,600

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What does “Fed OASDI/EE” mean on a pay stub?

“Fed OASDI/EE” stands for Federal Old-Age, Survivors, and Disability Insurance—Employee share. It’s the official label for the 6.2% Social Security tax withheld from an employee’s wages. The “/EE” indicates it’s the employee portion; the employer pays a matching 6.2% that doesn’t appear on the employee’s pay stub. Different payroll systems label this line item differently—you may see “Social Security Tax,” “SS Tax,” or simply “OASDI”—but they all refer to the same withholding.

For HR and payroll teams, this is one of the most common employee questions to field, especially when employees notice their OASDI withholding stops mid-year. This happens when the employee’s cumulative wages reach the annual wage base—at that point, withholding simply stops until the following January. Medicare withholding continues.

OASDI tax for self-employed workers

Self-employed workers are also required to pay OASDI—but instead of splitting the 12.4% with an employer under FICA, they are responsible for the entire amount under the Self-Employment Contributions Act (SECA).

Rather than having Social Security tax withheld from a paycheck, self-employed workers typically pay OASDI quarterly as part of estimated tax payments. However, they can deduct the employer-equivalent half (6.2%) as an above-the-line deduction when filing their annual tax return, effectively bringing their net OASDI cost down to the same 6.2% that employees pay.

Is OASDI tax mandatory?

For the vast majority of US employers, employees, and self-employed workers, OASDI tax is federally mandated under FICA and SECA. However, there are specific exemptions:

1. Religious groups

Certain religious groups and members of the clergy can apply to opt out of Social Security and Medicare taxes. Workers who do so will not receive Social Security or Medicare benefits in retirement.

2. Self-employed workers earning less than $400

Self-employed individuals with net self-employment income below $400 per year are not required to pay Social Security taxes.

3. State and local government employees

State or local government employees covered by a qualifying pension plan may be exempt, provided their plan offers benefits at least as generous as Social Security and allows them to begin receiving benefits at or before Social Security’s full retirement age.

4. Certain nonimmigrant and nonresident workers

Employees on certain work visas may be exempt from OASDI. This includes foreign students, researchers, and academics employed by universities, as well as foreign government employees working in the US. Additionally, the US has Social Security totalization agreements with more than 30 countries—these treaties prevent workers from being taxed by both the US and another country for the same earnings, which is a key consideration for HR teams managing international employees or expats.

How to calculate OASDI tax

OASDI is calculated as a percentage of an employee’s gross wages—their total earnings before any deductions. Here’s how to calculate it:

Step 1. Determine gross wages

Gross wages are total earnings before any deductions—such as Social Security, health insurance, or 401(k) contributions—are taken out.

Step 2. Multiply by 6.2% (0.062)

Multiply the employee’s gross wages for the pay period by 0.062. This gives the OASDI amount to withhold from the employee’s check. The employer owes a matching amount.

Step 3. Check against the annual wage base

Track the employee’s cumulative year-to-date wages. Once they hit the annual cap ($184,500 in 2026), stop withholding OASDI for the remainder of the calendar year.

Example: An employee earns $10,000 in gross wages for a pay period. $10,000 × 0.062 = $620.00 withheld from the employee’s paycheck. The employer also contributes a matching $620.00, for a total OASDI contribution of $1,240.00 that pay period.

Manage OASDI and payroll taxes automatically with Rippling

Calculating, withholding, and remitting OASDI correctly—across every employee, every pay period, every year—is one of the most compliance-critical tasks in payroll. Rippling’s full-service payroll software handles it automatically: calculating all FICA taxes (including OASDI), submitting tax forms and payments, and updating wage base limits each year so your team never has to track SSA announcements manually.

Employee withholdings flow directly into payroll with no manual entry required. Rippling’s automatic payroll compliance audits flag potential issues before they become penalties. Electronic copies of all employee tax forms are stored against employee profiles—accessible even after termination—for audit-readiness at any time.

Rippling also monitors federal, state, and local tax law changes continuously, flagging potential infractions so HR teams can stay ahead of FICA compliance without manually tracking regulatory updates.

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Frequently Asked Questions