OASDI Tax Explained: What Every Working American Needs to Know in 2026
Breaking Tax Update: The Social Security Administration just announced the 2026 OASDI wage base increased to $184,500—a $14,400 jump from 2025. If you earn above this threshold, you'll pay $893 more in OASDI taxes this year. But what exactly is OASDI, and why does it disappear from your paycheck mid-year? Here's everything you need to know.
What Is OASDI Tax? The Basics
OASDI stands for Old-Age, Survivors, and Disability Insurance—the official name for Social Security. That line on your paycheck labeled "OASDI" funds the program providing retirement benefits, disability income, and survivor benefits to millions of Americans.
2026 OASDI Tax Rates:
- Employees: 6.2% of wages (up to $184,500)
- Employers: 6.2% of wages (matching contribution)
- Self-employed: 12.4% of net earnings (you pay both portions)
- Maximum employee contribution: $11,439 per year
- Maximum self-employed contribution: $22,878 per year
How OASDI Tax Works in 2026
OASDI tax only applies to earnings up to $184,500 in 2026. Once your year-to-date earnings hit this threshold, OASDI deductions stop for the rest of the year.
Example: Sarah earns $200,000 annually as a software engineer. She pays 6.2% OASDI tax until her earnings reach $184,500 (around October), then OASDI deductions stop. Her total OASDI: $11,439. Her employer matches this amount.
OASDI vs. Medicare: Understanding FICA
Your paycheck shows two main federal payroll taxes under FICA (Federal Insurance Contributions Act):
- OASDI: 6.2% (capped at $184,500)
- Medicare: 1.45% (no cap) + 0.9% additional on earnings over $200,000
Key difference: OASDI has a wage cap, but Medicare tax applies to ALL earnings—no maximum.
Who Pays OASDI Tax?
Employees (W-2 Workers)
If you receive a W-2, your employer automatically withholds 6.2% for OASDI and matches it with another 6.2%. You never see this money—it's deducted before you receive your paycheck.
"I noticed my take-home pay jumped in November," says Marcus Johnson, 34, an IT consultant earning $195,000. "I hit the OASDI cap. Instead of losing $950 every two weeks to OASDI, that money stayed in my paycheck."
Self-Employed (1099 Contractors, Business Owners)
Self-employed individuals pay both portions—the employee's 6.2% and the employer's 6.2%—totaling 12.4% in self-employment tax.
2026 Self-Employment Tax Breakdown:
- OASDI: 12.4% on net earnings up to $184,500 (max: $22,878)
- Medicare: 2.9% on all net earnings (no cap)
Good news: You can deduct the employer-equivalent portion (half of self-employment tax) from your income taxes, reducing your overall tax burden.
Who Doesn't Pay OASDI Tax?
Exempt groups:
- Federal employees hired before 1984 (covered by CSRS instead)
- Some state and local government employees with alternative pension plans
- Certain religious groups (must apply for exemption)
Most Americans pay OASDI—exemptions are rare.
Why OASDI Tax Increases Every Year
The $184,500 wage base for 2026 represents an 8.5% increase from 2025's $170,100. According to Social Security Administration regulations, the OASDI wage base adjusts annually based on the national average wage index.
Recent OASDI Wage Base History:
- 2024: $168,600
- 2025: $170,100
- 2026: $184,500 (8.5% increase)
The 2026 jump is larger than usual due to strong wage growth and inflation adjustments.
Maximum Tax Impact by Income Level
| Annual Income | 2025 OASDI Tax | 2026 OASDI Tax | Increase |
|---|---|---|---|
| $50,000 | $3,100 | $3,100 | $0 |
| $100,000 | $6,200 | $6,200 | $0 |
| $170,100 | $10,546 | $10,546 | $0 |
| $184,500+ | $10,546 | $11,439 | +$893 |
Bottom line: Only those earning above $170,100 pay more OASDI tax in 2026. If you earn less than the old cap, your OASDI tax stays the same.
What You Get for Paying OASDI Tax
Every dollar you pay into OASDI builds your Social Security benefits. You earn Social Security credits by paying OASDI tax—in 2026, you earn 1 credit for every $1,810 in covered earnings (maximum 4 credits per year). Most people need 40 credits (10 years of work) to qualify for retirement benefits.
2026 Average Monthly Benefits:
- Retirement: $1,907
- Disability: $1,542
- Survivor (widowed parent + 2 children): $3,653
Three Types of Benefits OASDI Funds
1. Old-Age (Retirement) Benefits
You can claim Social Security retirement as early as age 62, but benefits increase if you wait until full retirement age (67 for most current workers) or age 70. Maximum 2026 benefit at full retirement age: $3,822/month for someone who paid maximum OASDI tax for 35 years.
2. Survivors Benefits
If you die, your spouse, children, or dependent parents may receive monthly benefits based on your OASDI contribution record.
3. Disability Insurance
If you become disabled before retirement age and can't work, OASDI provides monthly income. You must meet strict medical criteria and have sufficient work credits.
According to the Social Security Administration, over 67 million Americans received Social Security benefits in 2025.
Common OASDI Tax Questions
Why Does OASDI Disappear from My Paycheck?
Once your year-to-date earnings reach $184,500, your employer stops withholding OASDI tax. You'll notice a sudden increase in take-home pay. Medicare tax continues all year regardless of earnings.
Pro tip: If you switch jobs mid-year and your combined earnings exceed $184,500, you may overpay OASDI tax. File Form 843 with your tax return to claim a refund.
Do I Pay OASDI Tax on Bonuses?
Yes. Bonuses, commissions, and other compensation count as wages subject to OASDI tax—until you hit the $184,500 cap.
Example: Elena earns $180,000 salary plus a $20,000 year-end bonus.
- Salary triggers OASDI tax: $180,000 (full amount)
- Bonus triggers OASDI tax: Only $4,500 (reaches $184,500 cap)
- Total OASDI: 6.2% of $184,500 = $11,439
Can I Opt Out of OASDI Tax?
Generally, no. OASDI tax is mandatory for most workers. The few exemptions require specific circumstances (religious objections, certain government employment). Even if you have a private retirement account, you still pay OASDI tax.
OASDI Tax Strategies for High Earners
Timing Income Recognition
If you're close to the $184,500 threshold, timing matters. Accelerating income into one year means hitting the cap faster and stopping OASDI deductions sooner.
Understanding Business Structure Impact
S-Corporation owners can reduce OASDI tax by paying themselves a reasonable salary and taking additional compensation as distributions (which don't face OASDI tax). However, the IRS scrutinizes unreasonably low salaries—consult a tax professional.
The Future of OASDI Tax
Social Security's trust fund faces long-term funding challenges. Without changes, the trust fund reserve may be depleted by 2034, at which point incoming OASDI taxes would cover only 80% of scheduled benefits.
Potential solutions being discussed:
- Raising the OASDI wage base (taxing more income)
- Increasing the tax rate above 6.2%
- Raising full retirement age
- Eliminating the wage cap entirely
Some lawmakers propose removing the OASDI wage cap for earnings above $400,000, creating a "donut hole" where income from $184,500-$400,000 escapes OASDI tax, but income above $400,000 faces the 6.2% rate again.
Frequently Asked Questions
What does OASDI stand for? Old-Age, Survivors, and Disability Insurance—the official name for Social Security.
How much is OASDI tax in 2026? Employees pay 6.2% on earnings up to $184,500 (maximum $11,439). Self-employed pay 12.4% (maximum $22,878).
Is OASDI tax the same as Social Security tax? Yes, they're identical. OASDI is the formal name; Social Security is the common name.
Why did my OASDI tax stop mid-year? Your year-to-date earnings reached $184,500. OASDI tax only applies to the first $184,500 you earn each year.
What's the difference between OASDI and Medicare tax? OASDI (6.2%) has a wage cap of $184,500. Medicare (1.45%) applies to all earnings with no maximum.
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Disclaimer: This article provides general information about OASDI tax based on 2026 rates and regulations. Tax situations vary by individual circumstances. Consult a qualified tax professional or CPA for personalized advice. OASDI rates and wage bases are set by federal law and may change. Information current as of January 2026.