When you have ever looked at your paycheck and wondered why a piece of your money had disappeared, you might have seen a line on your paycheck that said OASDI tax. One of the most important constituents of the U.S. Social Security system is OASDI; the abbreviation means Old-Age, Survivors, and Disability Insurance.

OASDI tax is compulsory payroll tax, which benefits millions of Americans through Social Security. These benefits are used to assist retirees, individuals with disabilities and surviving family members of the deceased workers. Concisely, the tax assists in establishing a financial buffer to individuals and families at various phases of life.

Both employers and employees are contributing to OASDI. According to the latest tax regulations, the employee contribution is 6.2 percent of the gross wage, and the employer contribution is equally 6.2 percent, on top of which is the employer contribution. When you are self-employed, you are liable to the entire 12.4 per cent, but you can possibly claim some of this as a deduction to your tax returns.

The OASDI tax is not levied on income exceeding a particular income threshold, the wage base limit which is periodically adjusted due to inflation. Your paycheck does not receive any more OASDI tax once you have earned that limit during that year.

One should remember that the OASDI tax is not like Medicare tax, although they both belong to the Federal Insurance Contributions Act (FICA). Whereas Medicare is used in the coverage of healthcare expenditure in old-aged people, OASDI emphasizes on long-term and income security.

Learning about OASDI tax will make you understand your pay stub better and will make you value the fact that your contribution is going to help you get future benefits. Although this might sound deductive in the modern day information, OASDI tax is significant in the provision of economic stability to the individuals, families, and the communities all over the United States.

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