Have you ever looked at your paycheck and wondered why so much money gets taken out?
If you look more closely at it, you'll likely notice a slew of acronyms that, without any explanation, lowered your take-home pay. For most workers, one of the biggest culprits is called "OASDI."
It can be frustrating to see your expected wages knocked down, especially if you don’t know why it's happening.
That's why we’re taking a deep dive into some of your most pressing tax questions and breaking down puzzling terms to help make tax season a little less taxing. Here is what you need to know about the OASDI tax.
Ready to file your taxes?: What to know, including deadlines, tax brackets and more
What is OASDI?
OASDI, commonly known as Social Security, is the Old-Age, Survivors and Disability Insurance program. These benefits go to survivors of insured workers, retired or disabled workers and their dependents.
OASDI is part of FICA, the taxes that fund Social Security and Medicare. FICA stands for Federal Insurance and Contributions Act.
If you're an employee, 6.2% of your paycheck goes toward OASDI – which your employer matches – and is sent to the federal government to help fund Social Security. It also may be listed as OASDI/EE tax on your paycheck, with the “EE” standing for employee expense.
Self-employed individuals also pay OASDI taxes but at a higher, 12.4% rate because they don’t have an employer to match their contribution.
What is the OASDI limit 2023?
There is a limit to how much of your wages can be subject to OASDI taxes – called taxable maximum. The taxable maximum for 2023 is $160,200, which increased from $147,000 in 2022. This means the most an employee will contribute to OASDI this year is $9,932.40. For self-employed people, the maximum is $19,864.80.
What is the difference between Social Security and OASDI?
Social Security and OASDI taxes are one and the same. OASDI is often colloquially called Social Security because it’s housed under the Social Security Administration, the agency that distributes Social Security numbers and works with retirement, insurance and income programs.
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This article originally appeared on USA TODAY: What is OASDI? The federal tax on your paycheck explained.