HHave you ever looked at your salary and wondered why so much money is being deducted? And to go even further, have you ever wondered what the OASDI tax which is deducted each time?
Being paid less than expected can be upsetting, especially if you don’t understand why.
To make tax season a little less onerous, we dig deep into some of your most pressing tax issues and demystify complex concepts.
What is OASDI and what does it mean?
The Old age, survivors and invalidity insurance (OASDI) program is also called Social Security. These benefits are granted to dependents, retired or disabled workers and survivors of insured workers.
FICAtaxes used to pay Social security and health insuranceincludes OASDI. Federal Law on Insurance and Contributions is called FICA.
If you work as an employee, 6.2% of your salary goes to the federal government to support Social Security and goes to OASDI, which your employer matches. On your paycheck it may also appear as OASDI/EE taxwhere “EE” stands for employee expenses.
Freelancers pay OASDI taxs also, but at a higher rate of 12.4% because their employers do not match their contributions.
Your income can only be subject to OASDI up to a certain amount, called the “taxable maximum”. The highest taxable amount for 2023 is $160,200from $147,000 in 2022. This indicates that a worker’s maximum OASDI contribution for that year is $9,932.40. The upper limit for independent contractors is $19,864.80.