If you have ever looked calmly your payroll And if you've wondered why your net salary is significantly lower than you expected, you've probably seen a line that says OASDI, OASDI/EE, Social Security or FICA And you're still not entirely clear on what it means. And of course, when you see a significant portion of your salary disappearing each month, the least you can do is want to know where that money is going.
In reality, those initials represent one of the pillars of the United States' social safety net. This tax funds... retirement benefits, disability benefits, and aid for surviving family members...among other programs. Understanding how the OASDI tax works, how much you pay, what the cap is, and what benefits it generates is key to knowing what you're funding today and what you might receive tomorrow.
What exactly is the OASDI tax?
The term OASDI comes from English Old-Age, Survivors, and Disability Insurance, which in Spanish translates as Old age, survivors and disability insuranceIt is the official name of the Social Security program in the United States, managed by the Social Security Administration (SSA).
When you see OASDI, OASDI/EE, or simply Social Security on your payslip, you're seeing the portion of your payroll taxes that It is used to finance retirement pensions, disability benefits, and aid to the families of deceased workers.In other words, it is a contributory social security system: while you work, you contribute; when you meet the requirements, you can receive benefits.
In practice, the OASDI tax is part of what is known as FICA taxes (Federal Insurance Contributions Act)The Federal Insurance Contributions Act. Under this umbrella, two major components are collected: OASDI (Social Security) and Medicare (health insurance primarily for people over 65 and certain people with disabilities).
There is a parallel set of regulations for self-employed workers, the SECA (Self-Employment Contributions Act)which requires you to pay both components (Social Security and Medicare) directly through your tax return, because in that case there is no company to withhold and pay those amounts for you.
Who pays for OASDI and what type of employment does it apply to?
In the case of employees, the OASDI tax is calculated as a fixed percentage of their salaries up to a certain annual limit. Currently, the base rate is 6,2% for the employee and another 6,2% for the employerso that, between the two, a total of 12,4% is contributed on the portion of the salary subject to Social Security.
In many payrolls, the OASDI line appears as OASDI/EE, where “EE” stands for “Employee Expense”This notation differentiates what the employee contributes from what the company pays, even though you only see the 6,2% that corresponds to you as an employee deducted from your salary.
If you're self-employed, the situation changes: there's no company to cover the other half, so you're responsible for the entire contribution. In that case, you pay a 12,4% for OASDI and 2,9% for Medicare, that is, 15,3% in totalThe positive aspect is that the self-employed individual can deduct approximately half of that expense in their income tax return, reducing the taxable income base.
Keep in mind that Not everyone who works in the United States is subject to OASDI.There are exceptions, especially for certain non-residents and people with specific visas (F-1, J-1, M-1, Q-1, Q-2, etc.) who, for a time, may be exempt from paying FICA, as long as they continue to be considered non-resident aliens for tax purposes and their employment is directly linked to their studies or approved program.
Relationship between OASDI and FICA tax
When you look at your pay stub, it's common to see Social Security and Medicare entries. grouped under the FICA labelFICA is the legal framework that establishes that both workers and employers must contribute to these two programs.
Within FICA, the tax is divided into two main blocks: one 6,2% for OASDI (Social Security) and 1,45% for MedicareThis adds up to 7,65% borne by the employee. The employer contributes another 7,65%, so the total FICA cost per employee is 15,3%.
In 2025, the total FICA rate for salaried workers remains at a 7,65% for each party (employee and employer)While the self-employed continue to contribute the full 15,3% through the SECA tax. Within that 7,65%, the bulk is represented by the OASDI, which finances retirement, disability, and survivor benefits.
It is also important to distinguish the tax additional Medicare of 0,9%This is a tax that the employer must begin withholding when an employee's annual salary exceeds $200.000. This surcharge is levied solely on the employee and has no equivalent employer share, and it does not affect OASDI, but only the health component of Medicare.
Maximum salary base and OASDI tax limits
The OASDI tax does not apply to all income without limit, but there is a annual salary cap subject to this tax, known as the “salary base limit” or “taxable maximum”Above a certain income level, OASDI payments are no longer required on the excess.
In 2022, this maximum taxable amount was set at $147.000In 2023 it rose to $160.200, and by 2025 the limit for the Social Security component within FICA has been set at $176.100These amounts are updated annually, usually following the general evolution of wages in the US economy.
Taking 2023 as an example, an employee earning at least $160.200 during the year would have reached the maximum contribution to OASDI, which would be $9.932,40 (6,2% of $160.200)At that point, even if their salary continued to rise, no further OASDI withholdings would be applied to the portion exceeding the cap.
For a self-employed worker in 2023, the maximum contribution to Social Security (OASDI only, not including Medicare) reached $19.864,80, equivalent to 12,4% of the maximum baseThe same applies in 2025: self-employed workers pay the full rate, but only on the first $176.100 of net profits subject to SECA.
What benefits does the OASDI program finance?
All revenue collected from the OASDI tax is allocated to a series of very specific benefits, which form the core of Social Security. Essentially, the program finances retirement benefits, disability benefits, and aid for survivors and dependent family members.
The main categories of OASDI beneficiaries are:
- Retired people: workers who have accumulated enough Social Security credits and begin to collect an old-age pension.
- Persons with disabilities (SSDI): Those who cannot work, or only in a very limited way, due to a serious long-term disability, as well as certain family members in their care.
- Survivors: spouses, children and, in some cases, parents dependent on a deceased worker who had contributed to the system.
In addition to these groups, Social Security also recognizes rights to divorced couples, widows and widowers, and dependent children of retirement or disability beneficiariesprovided they meet certain requirements regarding age, marital status, economic dependence and duration of marriage in some cases.
The OASDI program is financed through two large trust funds: the Old Age and Survivors' Insurance Trust Fund (OASI), which pays retirement pensions and benefits to surviving family members, and the Disability Insurance Trust Fund (DI)which covers disability benefits. Both funds are financed by payroll taxes from workers and employers, as well as SECA payments from the self-employed.
Social Security credits and requirements for collecting OASDI
To be entitled to most OASDI benefits, it is not enough to have paid the tax just once: it is necessary accumulate a certain number of Social Security “credits”These credits are earned by working and paying FICA or SECA.
Each year you can accumulate up to four creditsDepending on your income. You don't need to work full-time all year; what matters is reaching the income threshold set by the SSA to earn each credit. Once you reach the annual maximum, you won't earn any more credits that year, no matter how high your salary is.
To be eligible for a standard retirement pension, the SSA normally requires 40 Social Security credits, which is roughly equivalent to 10 years of workIf you fall below that threshold, you will not be entitled to your own retirement benefit under OASDI, although you may be eligible for benefits as a spouse, ex-spouse, or survivor of someone who has reached the minimum.
In the case of disability benefits and survivor benefits, the number of credits required may be lower, especially when the worker is younger at the time of disability or deathThe SSA uses a table that combines age and recent years of contributions to determine if the coverage requirement is met.
Retirement age, amounts and historical evolution of benefits
The age at which you start receiving retirement benefits is another key element. Although you can apply for Social Security from the age of 62 years of age, that entails a permanent reduction in the monthly amount.The so-called "full retirement age" depends on the year of birth.
For those born in 1960 or later, the full retirement age is set at 67 yearsFor previous generations, full retirement age is between 65 and 66 years and a few months, depending on the year of birth. If you start receiving a pension before that age, it is reduced by applying a formula that deducts percentage points for each month of early retirement, with an additional penalty if the early retirement exceeds a certain number of months.
If you decide to delay retirement beyond full retirement age, up to a maximum of 70 yearsYour monthly profits increase thanks to the so-called credits for delayed retirementIn this way, the system tries to be neutral in the long term: you earn less if you start earlier for a longer period, or you earn more for fewer years if you wait until later.
Historically, benefit amounts have increased considerably. In 1940, shortly after the program's implementation, some 222.000 people received an average benefit of about $22,60 per monthIn 2023, the average retirement benefit was around $1.827 per month, and for 2024 it is around $2.000 per month.
These increases are not only due to higher salaries, but also to the automatic adjustment introduced by the COLA (Cost of Living Adjustment)which adjusts benefits according to inflation. By 2025, the COLA has been set at around 2,5%, applicable to almost all Social Security beneficiaries, regardless of the type of benefit they receive.
How are retirement benefits calculated?
The calculation of the retirement pension amount under the OASDI program is not a simple percentage of the final salary. The SSA uses a formula that aims to be progressive, especially protecting those who have had low wages throughout their working life.
First, your annual earnings throughout a working career are "indexed" to take into account the evolution of average salariesNext, the 35 years with the highest adjusted earnings are selected. If you have worked for less than 35 years, the missing years are filled with "zero" earnings, which lowers the average.
With those 35 years, the so-called Average Indexed Monthly Earnings (AIME)That is, the monthly average of your indexed earnings. Then, a tiered formula with different percentages is applied (higher for the first few dollars of the base and lower for the upper tiers), resulting in the Primary Insurance Amount (PIA), the basic amount you would be entitled to receive if you retired at your full retirement age.
Finally, that PIA is adjusted depending on whether you start receiving the benefit before or after the full retirement age. The sooner you start, the bigger the cut; the longer you delay, the bigger the increasealways within the permitted limits. In practice, your decision about when to collect can make considerable differences throughout your retirement.
OASDI, disability and family benefits
The OASDI program also covers people who, before reaching retirement age, suffer a severe disability. To access the Social Security Disability Insurance (SSDI) It is necessary to have accumulated sufficient work credits and meet the SSA definition of disability.
The SSA considers a worker "disabled" if they is unable to perform substantial work activity due to illness or physical or mental injury that is expected to last at least 12 months or that could cause death. The assessment process follows a five-step sequence that analyzes, among other aspects, whether the applicant can perform their usual work, whether they can adapt to other jobs, and whether their condition is listed on specific agency registries.
In most cases, disability benefits are not paid immediately: there is a waiting period of five full months from the date the disability began before the applicant starts receiving benefits. Once approved, the benefit can be maintained as long as the medical and financial conditions justifying the disability continue.
If a worker who has contributed to the system dies, their family can also be protected. The program provides for this. benefits for survivors, including spouses, former spouses, minor or disabled children, and in some cases, dependent parentsThe amount of these payments depends on both the income history of the deceased worker and the age and situation of each family member.
Differences between OASDI and SSI
It's easy to confuse the OASDI program with Supplemental Security Income (SSI) because both are administered by the SSA and target older adults or people with disabilities. However, they are different programs. different programs with very different eligibility rules.
OASDI is a contributory social security program: Your rights depend on your work history and the Social Security taxes you have paidIf you have not contributed enough or do not meet the employment credit requirements, you will not be able to obtain your own benefit under this program, although you could benefit as a family member of someone who does meet the requirements.
The SSI, on the other hand, is a need-based assistance program. It is aimed at people over 65 or with disabilities who They have very limited income and resources, even if they have never worked or do not have enough Social Security credits.For SSI, income (employment and non-employment) and assets are evaluated in detail, with fairly low limits.
In 2024, the maximum SSI payment is around $943 per month for a single person and $1.415 for an eligible coupleThese figures fall below 100% of the federal poverty level. Many people combine SSI with other programs, such as Medicaid or food stamps, to reach a minimum subsistence level.
OASDI, residency status and exemptions for nonresidents
Not all foreign nationals working in the United States are automatically subject to FICA and, therefore, OASDI. The obligation to contribute depends on whether they are considered foreigners, whether resident or non-resident for tax purposes, of their visa and the nature of their employment.
As a general rule, those who are considered resident foreigners (either because they have a Green Card, or because they meet the substantial presence test) have the same obligations as a U.S. citizen: they pay Social Security and Medicare taxes on their wages, with very specific exceptions.
In contrast, many non-resident foreigners with F-1, J-1, M-1 or Q-1/Q-2 visas They may be exempt from paying FICA for a limited period. For example, full-time students typically have an exemption of up to five calendar years; other profiles, such as researchers, professors, medical interns, or au pairs, usually have a two-year exemption, provided that the employment is directly related to the purpose of the visa.
There is also a specific exemption for wages received by students for working for their own university or school while still being students, so that Those earnings can be exempt from Social Security and Medicare.Once the exemption period has expired or their immigration status has changed, these individuals become subject to FICA like any other worker.
Company obligations and payroll management
From a business perspective, the OASDI tax is part of the payroll taxes (including aspects such as the payroll advance) that employers must withhold and declare in the United States. In addition to Social Security and Medicare, this package includes federal income tax and federal unemployment tax (FUTA).
The employer is obligated to Calculate, withhold and pay on time the portion of OASDI corresponding to each workeras well as paying the portion that is their responsibility as a company. These obligations are reported periodically in payroll tax returns (usually quarterly) and in annual summaries.
At the end of each year, the company must issue and send to the SSA the W-2 form for each employeeThis form details gross wages and tax withholdings, including amounts paid for OASDI and Medicare. Workers then use this W-2 to file their income tax returns (federal and, if applicable, state).
These tax payments are almost always made through electronic transfers through the EFTPS system or other electronic banking methods. Failure to meet deadlines or incorrectly reporting amounts may result in penalties, interest, and legal problems for both the company and its directors.
Errors in FICA withholding and tax refund
In some cases, especially for non-residents with special visas, it may happen that the employer withhold FICA (and therefore OASDI) taxes when the worker is actually exemptIf you detect this type of error in your payslip, you have the option to claim a refund.
The first step is to contact your employer and request that he correct the improperly applied withholdingsIf an incorrect W-2 has already been issued, the company must generate a corrected W-2c for that year. This document adjusts the amounts reported to both the IRS and the SSA.
If, for whatever reason, the employer cannot or will not return those amounts, the employee may choose to claim the refund directly from the IRS by submitting the specific forms for the FICA refund. This process can take several months; in many cases, it is estimated that the IRS takes at least 12 weeks to process and approve the refund, if everything is in order.
There is no online tool to track the status of a FICA refund in real time, but it can be done contact the IRS nonresidents department by phone to check the progress of the case. Some tax preparation services also offer assistance in completing these claim forms.
Taken together, the OASDI tax may seem, at first glance, like just another line item subtracted from the payroll, but in reality it supports a protection system that covers retirement, disability and survivorship for millions of people in the United States; learn how it worksUnderstanding how much you pay, what the limits are, and what conditions you must meet to access the benefits allows you to better understand why that percentage is deducted from your salary and how those contributions today can become a safety net for you and your family in the future.
