OASDI Tax

The “OASDI (Old-Age, Survivors, and Disability Insurance) tax” is the official name for the U.S. Social Security tax that funds benefits for “retirees, survivors of deceased workers, and individuals with disabilities.” OASDI revenues go into two separate “trust funds” (the OASI Trust Fund and the DI Trust Fund), rather than the general Treasury. This earmarking means Congress cannot spend Social Security payroll taxes on unrelated programs.

Because it’s legally tied to a trust fund, Social Security benefits — and therefore the implicit “return” on your OASDI contributions — are adjusted each year for inflation, something no other federal tax provides its payers.

FICA taxes (OASDI for Social Security + HI for Medicare) are generally withheld from the first dollar earned for most employees, but there are specific exceptions for “domestic employees, election workers, and agricultural workers.”

Under the Social Security Act’s Section 218 exclusion, most “election officials and poll workers” are exempt from FICA until they have been paid $2,300 or more in a calendar year (unless a State’s own 218 agreement sets a lower threshold). For more details, visit – “ssa.gov/slge/election_workers.htm”.

You must withhold FICA on a household employee’s wages once you pay them $2,700 or more in “cash wages” in 2024. Wages under that amount are not subject to FICA withholding. For more details, visit – “irs.gov/instructions/i1040sh”.

Farmworker wages become subject to FICA if either:

An individual worker earns $150 or more in cash wages in the year (the “$150 test”), or
You pay $2,500 or more in total ‘cash and noncash’ wages to all farmworkers in the year (the “$2,500 test”). (Seasonal farmworkers paid ‘under $150’ still count toward the $2,500 test but aren’t themselves taxed if under $150). For more details, visit – “irs.gov/publications/p225”.

Self-employed individuals only pay “SECA taxes (OASDI + HI)” if their net earnings exceed $400 in a year. Below $400, you neither owe SECA nor need to file ‘Schedule SE’ just for that purpose. “$400 or more”: SECA taxes apply to all net earnings (after deducting business expenses). For more details, visit – “irs.gov/taxtopics/tc554”.

To see a consolidated history of all FICA (and, for self-employed, SECA) credits you’ve posted to Social Security: Create a “my Social Security” account at “ssa.gov/myaccount/”. And, view your Social Security Statement.

Note: Unlike many business or charitable expenses, neither the employee’s nor the employer’s OASDI payments are deductible against federal income tax.

OASDI Tax Limit -

The OASDI tax limit refers to the maximum amount of earnings subject to the “Old-Age, Survivors, and Disability Insurance” (Social Security) tax in a given year. For the 2025 tax year, the Social Security (OASDI) taxable ‘wage base’ (the “cap” on earnings subject to OASDI tax) is $176,100.

Employee maximum OASDI tax (6.2%): “0.062 × $176,100 = $10,918.20”. The employer must contribute the same amount. Thus, totaling 12.4%.
Self-employed maximum OASDI tax (12.4%): “0.124 × $176,100 = $21,836.40”.

OASDI Tax Rate -

FICA (Federal Insurance Contributions Act) -

FICA — the Federal Insurance Contributions Act — funds two programs: Social Security (OASDI) and Medicare. Both “employees and employers” share the cost.

Employee’s Portion (7.65% of gross wages): “6.2% OASDI tax (Social Security)” + “1.45% Medicare tax” = “7.65% withheld from wages”.
Employers match this 7.65% (6.2% + 1.45%) (i.e., employers must contribute an amount equal to what they withhold from employees).
Totaling 15.3% sent to the IRS (Internal Revenue Service). By law, both sides share the burden equally — hence the 7.65%/7.65% split.

OASDI (6.2%) applies only to the first  $176,100 of wages in 2025 (the “wage base limit”).

Medicare Hospital Insurance Tax (HI) (1.45%) applies to all wages, with no cap. Unlike Social Security (OASDI), which stops taxing earnings once they exceed ‘an annual cap’ (e.g., $168,600 in 2024), Medicare taxes apply to ‘every dollar’ you earn, no matter how high your income is.

If an individual earns over $200,000 (single filer), an Additional Medicare Tax of 0.9% applies — but that extra amount is withheld only from the employee. Means, Employers do not withhold the Additional Medicare Tax; they only match the basic 1.45%.

If you have two (or more) jobs in the same calendar year, you might overpay the “6.2% Social Security portion” because each employer withholds up to the annual cap separately. If the total Social Security taxes withheld from your wages (by all employers) exceeds 6.2% of the annual ‘wage base cap’ (e.g., $168,600 in 2024), you can claim a refund for the excess amount by reporting it on ‘Schedule 3, Line 11’ of your IRS Form 1040.

SECA (Self-Employment Contributions Act) -

When you’re self-employed, you’re considered both the “employee” and the “employer” for Social Security and Medicare purposes.

Self-employed individuals pay “12.4% OASDI + 2.9% Medicare = 15.3% (the full FICA-equivalent rate)”. Medicare:9% on all your net earnings (no cap).

Self-employed people’s “SECA and income tax” obligations are decreased by two deduction provisions. The two deduction provisions for self-employed individuals are codified in the “U.S. Internal Revenue Code (IRC).” These provisions aim to treat self-employed people in a similar way to how “employers and employees” are treated for ‘FICA and income tax’ reasons.

Provision: “26 USC § 1402(a)(12)” allows a deduction equal to 7.65% of net earnings before calculating SECA tax. This deduction lowers the base of earnings subject to SECA tax (effectively removing the “employer portion” of the tax). If “net earnings = $100,000”, “Deduction = 100,000 × 7.65% = $7,650”, “SECA Tax Base = 100,000−7,650 = $92,350”, and “SECA Tax = 92,350 × 15.3% = $14,130”.
Provision: “26 USC 164(f)”, a self-employed taxpayer may deduct ‘one-half of the self-employment (SECA) tax paid’ as ‘an above-the-line adjustment to income’, thereby reducing adjusted gross income. You claim it on “Schedule 1 (Form 1040), line 14 (Deductible part of self-employment tax).” If “SECA Tax = $14,130”, “Income tax deduction = $14,130 ÷ 2 = $7,065”, and “Taxable Income = 100,000 − 7,065 = $92,935”. $92,935 is your AGI.

Medicare Hospital Insurance Tax (HI) (2.9%) applies to 100% of your net self-employment income, with no cap. Unlike Social Security (OASDI), which stops taxing earnings once they exceed ‘an annual cap’ (e.g., $168,600 in 2024), Medicare taxes apply to ‘every dollar’ you earn, no matter how high your income is.

For American Expatriates -

For U.S. citizens working abroad (either as employees of a U.S. employer or as self-employed), the “Old-Age, Survivors, and Disability Insurance” (OASDI) portion of Social Security is no different than it is for stateside workers. However, exceptions apply.

General rule -

Wages paid outside the United States by a foreign employer are not subject to “U.S. Social Security (OASDI) or Medicare withholding.”

Exception for “U.S.-owned” or affiliate employers -

A foreign employer that is “a subsidiary or affiliate of a U.S. company” can elect to remain within U.S. coverage. By filing Form 2032 (“Contract Coverage Under Title II of the Social Security Act”), the foreign affiliate requests that “the U.S. OASDI and Medicare taxes” be withheld on behalf of its U.S. citizen or resident-alien employees.

Totalization (Social-Security) treaties -

Even when neither the general rule nor an election under Form 2032 applies, you may be covered by your host country’s system — and thereby exempt from U.S. OASDI — if the U.S. has ‘a totalization agreement’ with that country. These treaties prevent “dual contributions” and ensure you pay into only one system at a time.

For Foreigners -

Certain nonresident aliens (for example, foreign government employees under A-1/A-2 status, students on F-1/J-1 visas, or trainees on J-1 visas) may be exempt from “U.S. OASDI and Medicare” withholding. This relief comes either by statute (for specific visa categories) or under a totalization treaty between the U.S. and the alien’s home country.

Visit the official OASDI link for additional information:

https://www.ssa.gov/policy/docs/statcomps/supplement/2024/oasdi.html.

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