- Understanding California Tax Withholding on a Paycheck
- Options on Withholding Taxes on Paychecks
- What Does Backup Withholding Mean?
- Are 401(k) Contributions OASDI Taxable?
- What Is the Difference Between Single & Married Withholding?
- What Does It Mean When My Paycheck Says That I'm Exempt From Federal Taxes?
Most employers in the United States must take OASDI tax out of their employees’ paychecks. OASDI stands for Old Age, Survivors and Disability Insurance, which is a program that the Social Security Administration oversees. On your paycheck, OASDI withholding is the acronym for the tax associated with the program.
When President Franklin D. Roosevelt signed the Social Security Act in 1935, it contained only retirement benefits for qualified workers. In 1939, the law was amended to include benefits for retirees’ spouses and children. The Social Security taxing provisions were also extracted from the Social Security Act and put in the Internal Revenue Code and renamed FICA, which stands for Federal Insurance Contributions Act. In 1956, President Dwight D. Eisenhower added disability benefits to the Social Security Act. Prior to the implementation of disability insurance, the program was called OASI; after the implementation, it was called OASDI.
Employers in Oregon might have different ways of showing the tax on their workers’ paychecks. Whereas your employer may abbreviate it as OASDI, another might call it FICA and another might label it SS for Social Security. All these acronyms mean the same thing.
OASDI withholding rate is the same for all employees in the United States. As of 2012, your employer withholds OASDI at 4.2 percent of taxable wages up to $110,100 for the year. Your taxable wages are your earnings after applicable pretax deductions such as a section 125 health plan or a flexible spending account. Congress sets the rate each year, which is subject to change. You may obtain the OASDI tax rate from the Social Security Administration website.
Not many employees are exempt from OASDI tax. Exclusion occurs only if you work one of the limited jobs that do not require the tax. For example, if you work for a school, college or university in Oregon at which you are also a regular student, OASDI tax does not apply to you.
Medicare, which provides hospital insurance to qualified individuals, was passed into law in 1965. Medicare tax is collected under the authority of FICA and goes hand in hand with OASDI tax. Medicare has its own withholding rate -- 1.45 percent of all taxable wages, as of 2012. The same exclusions that apply to OASDI tax, such as pretax deductions and student-employee exception, also apply to Medicare tax. Some employers lump Medicare and OASDI taxes together and show them as one FICA deduction on employees’ pay stubs.
- Social Security Administration: Social Security and the "D" in OASDI: The History of a Federal Program Insuring Earners Against Disability
- Social Security Administration: Frequently Asked Questions
- Social Security Administration: 2012 Social Security Tax Rate and Maximum Taxable Earnings
- Washington University in St. Louis: Student FICA Exemption
- Advantage Payroll Services: Section 125/Premium Only Plans