What Is OASDI Tax and How Does It Work?

OASDI tax is the 6.2% Social Security payroll deduction taken from your wages to fund retirement, survivor, and disability benefits. Your employer pays a matching 6.2%, and self-employed workers cover both halves for a combined 12.4%. In 2026, the tax applies only to the first $184,500 you earn; anything above that is free of Social Security tax for the rest of the year.¹ The acronym stands for Old-Age, Survivors, and Disability Insurance, which is the formal name for the Social Security program.

What Your OASDI Contributions Pay For

Every dollar withheld goes into the Social Security trust funds, which pay three types of benefits.

Retirement. Workers born in 1960 or later reach full retirement age at 67, with reduced benefits available as early as 62. A worker who earned at or above the taxable maximum throughout their career and retires at full retirement age in 2026 would receive a maximum monthly benefit of $4,207.²³
Survivors. If a worker dies, their spouse, ex-spouse, children, or dependent parents may receive monthly payments. Eligibility depends on the relationship and age of the survivor, not on how the worker died.⁴
Disability. Workers who develop a medical condition that prevents them from working for at least 12 consecutive months can collect monthly disability payments. You generally need 40 work credits, with 20 earned in the last 10 years, though younger workers can qualify with fewer.⁵

The system is pay-as-you-go. Your contributions today fund benefits for current retirees and their families rather than sitting in a personal account with your name on it. When you eventually collect, the money will come from workers paying in at that time.

The Rate and How It Hits Your Paycheck

Federal law sets the OASDI rate at 6.2% for employees and 6.2% for employers, for a combined 12.4% of covered wages.⁶ Your employer withholds your share from each paycheck and adds its own matching contribution before sending both to the IRS.

On a $60,000 salary, that’s $3,720 taken from your pay across the year, with another $3,720 coming from your employer. Together, $7,440 flows into Social Security on your behalf.

The 2026 Wage Cap

You don’t pay OASDI on every dollar you earn. A yearly cap called the contribution and benefit base limits how much of your income is subject to the 6.2% withholding. For 2026, that cap is $184,500.¹ Every dollar above that amount is free of Social Security tax for the rest of the calendar year. The cap was $176,100 in 2025 and $168,600 in 2024.⁷

The Social Security Administration adjusts the limit each October based on national average wage growth. The maximum an employee can owe in OASDI for 2026 works out to $11,439 ($184,500 × 6.2%), with the employer paying the same. If you’re high-earning enough to hit the cap mid-year, you’ll notice your take-home pay jump once withholding stops.

Medicare tax works differently. The 1.45% Medicare withholding applies to all your wages with no cap, and once your wages pass $200,000 in a calendar year, an additional 0.9% Medicare surtax kicks in on the excess. There is no employer match for that extra portion.⁸

How OASDI Works if You’re Self-Employed

If you work for yourself, you owe the full 12.4% because there’s no employer to pick up the other half.⁹ This applies to sole proprietors, independent contractors, single-member LLC owners, and partners in a partnership. You owe self-employment tax only if your net earnings reach $400 or more for the year.¹⁰

The taxable amount isn’t your full net income. You first multiply your net self-employment earnings by 92.35%, which approximates the fact that W-2 employees don’t pay OASDI on the employer’s share. So if your net self-employment income is $100,000, the taxable base is $92,350, and your OASDI bill on that is $11,451.40.¹⁰

You calculate all of this on Schedule SE, filed with your Form 1040. The tax code lets you deduct half of your total self-employment tax (covering both the OASDI and Medicare portions) when figuring your adjusted gross income. That deduction reduces your income tax but not the self-employment tax itself.¹⁰

Quarterly Estimated Payments

Unlike W-2 employees who have taxes withheld each pay period, self-employed workers are expected to pay throughout the year in quarterly installments. If you expect to owe $1,000 or more when you file, you generally need to make estimated payments. For the 2026 tax year, those payments are due April 15, June 15, and September 15 of 2026, plus January 15, 2027.¹¹ Missing these deadlines can trigger underpayment penalties, an easy trap for freelancers in their first year of self-employment.

How OASDI Builds Your Own Eligibility

Paying OASDI doesn’t just fund current retirees. It also builds your future eligibility through work credits. In 2026, you earn one credit for every $1,890 in covered wages or self-employment income, up to a maximum of four credits per year.¹² Earning $7,560 or more in 2026 gives you the maximum four credits, regardless of when during the year you earned it.

You need 40 credits, roughly 10 years of work, to qualify for retirement benefits.¹³ Disability benefits use their own formula: generally 40 credits total, with 20 earned in the 10 years immediately before the disability began, though younger workers can qualify with fewer.⁵ If you stop working before hitting 40 credits, the credits don’t expire, but you won’t qualify for retirement benefits until you earn the rest.

Getting a Refund When Too Much Is Withheld

If you work two or more jobs, each employer withholds 6.2% independently, with no awareness of what the other is taking. When your combined wages exceed $184,500, you’ve overpaid Social Security tax for the year. You can claim the excess as a credit on your Form 1040 when you file your annual return.¹⁴ If you’re filing jointly, you and your spouse must calculate any excess separately, since the wage base applies per person, not per household.

A different situation arises when a single employer withholds too much by mistake. In that case, your first step is to ask the employer to correct it. If the employer won’t or can’t fix the error, you can file Form 843 directly with the IRS to request a refund. You’ll need to attach your W-2 and a statement explaining what happened, ideally including a note from the employer about any amounts already reimbursed.¹⁵

Who Is Exempt From OASDI Tax

Nearly all workers pay OASDI, but a few narrow categories are exempt. These exceptions are worth knowing because claiming one incorrectly can permanently disqualify you from future Social Security benefits.

Members of qualifying religious groups. Members of recognized religious sects that oppose accepting Social Security benefits and have provided for their own members since December 31, 1950, can apply for an exemption using IRS Form 4029. This includes some Amish and Mennonite communities. Approval requires waiving all rights to Social Security and Medicare benefits, and you must never have received or been entitled to any Social Security benefits previously.¹⁶
Nonresident alien students and scholars. Foreign students in F-1, J-1, or M-1 visa status who have been in the U.S. for fewer than five calendar years are generally exempt from OASDI and Medicare on wages related to their visa purpose, such as on-campus employment or authorized practical training. The exemption ends if they become resident aliens or change to a non-exempt immigration status.¹⁷
Certain state and local government employees. Some public-sector workers are covered by a government pension plan instead of Social Security. Whether they pay OASDI depends on whether their employer has entered into a voluntary coverage agreement (a Section 218 agreement) with the Social Security Administration. Employees not covered under such an agreement don’t pay OASDI on that government employment.¹⁸
Students working at their own school. If you’re enrolled at least half-time at a college or university and work for that same institution, your wages are generally exempt from OASDI. The exemption doesn’t apply to career employees of the school or to work during breaks longer than five weeks.

How OASDI Appears on Your Pay Stub

Payroll systems don’t always label the deduction “OASDI.” You might see SS, Soc Sec, FICA-OASDI, or simply OASDI. Whatever the label, the amount should equal 6.2% of your gross wages for that pay period, as long as you haven’t hit the annual wage cap yet.⁸ If the math doesn’t add up, flag it with your payroll department before year-end. An incorrect withholding can affect your earnings record with Social Security.

You’ll typically see a separate line for Medicare at 1.45% of your gross wages. Both OASDI and Medicare together make up FICA (Federal Insurance Contributions Act), so some stubs show a single “FICA” line that combines the two. If your stub shows only FICA at 7.65%, that’s the 6.2% OASDI plus 1.45% Medicare rolled together.¹⁹

1
Social Security Administration. Contribution and Benefit Base
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Social Security Administration. Benefit Examples For Workers With Maximum-Taxable Earnings
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Social Security Administration. Who Can Get Survivor Benefits
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Social Security Administration. Disability Benefits – How Does Someone Become Eligible
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Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
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Social Security Administration. Social Security Announces 2.8 Percent Benefit Increase for 2026
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Internal Revenue Service. Topic No 751 – Social Security and Medicare Withholding Rates
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Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
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Internal Revenue Service. Topic No 554 – Self-Employment Tax
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Internal Revenue Service. Publication 509 (2026) – Tax Calendars
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Internal Revenue Service. Topic No 608 – Excess Social Security and RRTA Tax Withheld
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Internal Revenue Service. Instructions for Form 843
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Social Security Administration. Are Members of Religious Groups Exempt From Paying Social Security Taxes
17
Internal Revenue Service. Foreign Student Liability for Social Security and Medicare Taxes
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Social Security Administration. Voluntary Agreements for Coverage of State and Local Employees
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Social Security Administration. What is FICA