How to Determine & Calculate OASDI Taxable Wages

Your OASDI taxable wages are your earnings that are subject to OASDI tax, which is also called Social Security tax. Your taxable wages for OASDI purposes might be either your gross wages or your wages after applicable deductions. OASDI is short for the federal Old Age, Survivors and Disability Insurance program.

To calculate your OASDI taxable wages, you can do some math manually or consult a tax withholding calculator. Read on to learn about the current Social Security tax rate as well as how to calculate the wages subject to it.

Determining Your Gross Wages

Before you determine taxable wages for OASDI purposes, you must determine your gross wages; this is your entire pay before deductions. Gross pay includes your regular hourly wages or salary, plus additional compensation such as bonuses, commission, overtime or retroactive pay for salary or wage increases. After you figure your gross wages, determine what’s taxable.

Understanding OASDI Exclusions

If you have nontaxable wages or deductions that are excluded from OASDI tax, do not include them in your wages when calculating the tax. Nontaxable wages include employee business expenses, such as mileage, lodging and meal reimbursements paid under an employer plan that meets Internal Revenue Service regulations. Excluded deductions include employer-sponsored pretax benefits that meet IRS policies, such as qualified health insurance, dependent-care assistance and parking and transportation fees. If necessary, consult your payroll department or the IRS for clarification on wages and deductions which are exempt from OASDI tax.

A simple way to understand taxable wages is to remember that nontaxable wages and pretax deductions subtracted from gross wages, plus taxable benefits equal taxable wages. Taxable benefits are employee benefits that are taxed on an after-tax, instead of pretax, basis.

Using Social Security Tax Rate

According to the Social Security Administration, as of 2020, you would calculate OASDI tax at 6.2 percent of taxable wages up to $137,700 for the year. Let’s say you earn weekly wages of $620, including a mileage reimbursement of $30. You also pay $70 toward your pretax health insurance plan. Subtract $30 and $70 from $620, which leaves $520. Multiply $520 by 0.062 to get $32.24, which is your OASDI tax amount for that week.

If you didn’t have mileage reimbursement and the pretax benefit, the entire $620 would be subject to OASDI tax, making your amount $38.44. Likewise, if you had after-tax benefits instead of pretax benefits, the entire $620 would be subject to OASDI tax.

You can find an OASDI tax calculator online that can show your taxes if you enter your income. A tax withholding calculator will also account for the federal tax withholding percentage and Medicare taxes.

Employee vs. Self-Employed

You may obtain your OASDI tax rate via the Social Security Administration website. Note that as of 2020, your employer pays OASDI tax at 6.2 percent of taxable wages up to $137,700 for the year.

The SSA mentions that self-employed individuals pay the entire amount of 12.4 percent, which is 6.2 percent plus 6.2 percent. When self-employed persons file their federal tax return, they may lower their net income from self-employment by half of their OASDI tax.