How to Calculate the Amount of OASDI Taxes to Withhold

by K.A. Francis ; Updated August 02, 2018

Old Age, Survivors and Disability Insurance is better known by its acronym OASDI, but is most commonly referred to as Social Security. The federal program, which was created in 1935, withholds taxes from workers' paychecks, and those monies are used to pay benefits to retirees, disabled workers, and surviving spouses and children. If you are curious about your OASDI withholding, you can crunch a few numbers and figure it out.

Calculate Your Gross Income

Before you learn how much is deducted for OASDI, you have to determine the amount of your pay. If you worked 40 hours in a week and earned $10 per hour, your gross income is $400 (40 hours times $10 per hour). If you worked five hours of overtime, you have to calculate that as well. The overtime hourly wage is typically 1.5 times your regular rate, so sticking with the original scenario, you have five hours of overtime that pays 1.5 times your regular $10 per hour, which is $15. This means you have $75 in overtime pay (five hours at $15 per hour). Add the two amounts, and you earn $475 for the week in gross income.

If you earn a salary, divide your annual salary by 2,080, which is the average number of hours a salaried employee works in a year. If you earn $40,000 a year, your hourly rate is $19.23 (40,000 divided by 2,080). Multiply the hourly rate by total hours worked to get your weekly wages. Fortunately, you can use an online OASDI tax calculator to do the math for you.

Social Security Rate and Limit

According to the Social Security Administration, the 2018 withholding rate for income up to $128,400 – up from $127,200 in 2017 – is 6.2 percent for both years. Your employer also contributes 6.2 percent. All wages earned up to $128,400 for 2018, and $127,200 for 2017, are subject to OASDI withholding. Any wages above these amounts are no longer subject to OASDI for the rest of the year. If you are self-employed, you are responsible for both the employer and employee portions of the tax.

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OASDI Taxable Wages

Multiply your gross wages by the withholding rate. If you earned $475 in gross wages, and you're an employee, $29.45 will be withheld from your paycheck ($475 gross income times 6.2 percent). If you're self-employed, double that amount: $58.90 will come out of your paycheck for OASDI.

Things To Consider

Medicare is a separate tax from OASDI and is calculated as 1.45 percent of your gross income. It is not included in the OASDI 6.2 percent, but if you want a clearer picture of your withholding amounts, you should keep it in mind. Unlike OASDI, there is no cap on Medicare withholding; it is deducted all year, regardless of how much you earn.

Pretax contributions to retirement plans are not exempt from OASDI. These payments aren't subject to federal tax, but they are fully taxable for Social Security and Medicare.

About the Author

K.A. Francis has been a freelance and small business owner for 20 years. She has been writing about personal finance and budgeting since 2008. She taught Accounting, Management, Marketing and Business Law at WV Business College and Belmont College and holds a BA and an MAED in Education and Training.

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