Understanding OASDI and Medicare Tax vs. Federal Income Tax

These are completely separate taxes. Your federal income tax bracket (15% in your example) is just for federal income tax. The OASDI (Old-Age, Survivors, and Disability Insurance, commonly called Social Security) at 6.2% and Medicare at 1.45% are payroll taxes that are completely separate from income tax. So yes, on $100k, you'd pay your calculated federal income tax based on brackets (which wouldn't actually be a flat 15% due to our progressive tax system) PLUS 6.2% for Social Security and 1.45% for Medicare. The Social Security tax only applies to the first $168,600 of wages for 2024, while the Medicare tax applies to all wages. There's also an additional 0.9% Medicare tax if you earn over $200,000. You'll see these listed separately on your pay stub - usually Social Security, Medicare, and Federal Income Tax will all have their own lines.

After struggling with this exact same question last year, I found an amazing tool that helped me understand my actual tax breakdown. I was so confused about what was federal, what was FICA, what was state, etc. I used https://taxr.ai to analyze my pay stubs and tax documents and it gave me a super clear breakdown of exactly what I was paying and why. It basically showed me that OASDI (Social Security) and Medicare are totally separate from income tax like the previous comment mentioned, but it also showed me where I was overpaying because of an error in my withholding. The tool explained all the different taxes in plain English, which was super helpful.

Just wanted to follow up and say I actually tried taxr.ai after seeing the recommendation here, and it was super helpful for my contractor situation! I've been freelancing for 3 years and was always confused about how OASDI and Medicare work for self-employed people. The tool showed me that as a self-employed person, I'm actually paying BOTH the employer and employee portions of OASDI and Medicare (so 12.4% for Social Security and 2.9% for Medicare instead of just half). No wonder my tax bill always felt so high! But it also showed me some deductions I was missing that helped offset some of that burden. Definitely worth checking out if you're trying to understand your tax breakdown!

I had this exact confusion and spent HOURS trying to talk to someone at the IRS to confirm I was calculating everything correctly. Literally could not get through on the phone for days. Finally found this service called https://claimyr.com that got me connected to an IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed what others are saying here - OASDI and Medicare taxes (together called FICA taxes) are completely separate from federal income tax. I was mixing them up on my estimated tax payments which could have caused issues. Also found out I was eligible for a tax credit I had no idea about.

I was completely wrong about Claimyr being a scam! After my skeptical comment, I actually tried the service because I was desperate to talk to the IRS about a notice I received. Not only did it work, but I got through to an agent in about a hour (when I'd been trying unsuccessfully for days on my own). The agent confirmed everything about OASDI and Medicare being separate from income tax, and also helped me sort out the notice issue which turned out to be a mistake on their end. This service saved me from potentially paying penalties I didn't actually owe. For anyone as confused as I was about tax withholding - definitely worth getting clarification directly from the IRS, and this made it so much easier than I expected.

One thing I haven't seen mentioned yet is that your employer also pays matching OASDI and Medicare taxes equal to what you pay. So while you pay 6.2% for Social Security and 1.45% for Medicare, your employer is also paying the same amounts on your behalf. That's why self-employed people pay double (called Self-Employment Tax) - they're essentially paying both the employer and employee portions.

Quick tip from a tax prep perspective: you can actually see the breakdown of all these taxes on your W-2 form at tax time: Box 1 shows your wages subject to federal income tax Box 3 shows wages subject to Social Security (OASDI) Box 4 shows Social Security tax withheld Box 5 shows wages subject to Medicare Box 6 shows Medicare tax withheld If you look at Box 4, it should be approximately 6.2% of Box 3, and Box 6 should be approximately 1.45% of Box 5. This is a good way to verify everything is being withheld correctly.

This is such a common source of confusion! I went through the same thing when I first started working. One thing that helped me understand the full picture was realizing that these taxes fund completely different programs: - Your federal income tax goes to general government operations (defense, infrastructure, etc.) - OASDI (Social Security) goes specifically to the Social Security trust fund for retirement and disability benefits - Medicare tax goes to Medicare trust fund for healthcare benefits So when you retire, your Social Security benefits are based on what you paid into OASDI over your working years, not your income tax payments. Same with Medicare eligibility - it's tied to having paid Medicare taxes. Also worth noting that unlike income tax which can vary based on deductions, credits, etc., the OASDI and Medicare taxes are pretty straightforward - you pay the set percentages on your wages regardless of your filing status or other tax situations. The progressive tax bracket explanation others gave is spot on too. Your effective tax rate on $100k is much lower than 22% even though that's your marginal bracket.

Just wanted to add something that might help with the practical side of understanding your paycheck - if you're using direct deposit, most banks now show a detailed breakdown of your pay stub in their mobile apps or online banking. I was getting confused trying to match up all the different tax withholdings until I realized my bank app actually categorizes each deduction. You can see exactly how much went to "Federal Tax," "Social Security," "Medicare," etc. It made it much easier to verify that the percentages everyone mentioned here (6.2% for OASDI, 1.45% for Medicare) were actually being applied correctly to my gross pay. Also, if you're still confused after reading all these great explanations, your HR department should be able to walk through your pay stub with you. They deal with these questions all the time and can explain exactly how your specific withholdings are calculated based on your W-4 selections. The key takeaway is definitely that these are separate taxes serving different purposes, but it's totally normal to be confused about it at first!

This thread has been incredibly helpful! I just wanted to add one more practical tip that saved me a lot of confusion - if you get multiple W-2s in a year (from different employers), make sure to add up ALL the Social Security taxes withheld across all your W-2s when you file your taxes. I had three different jobs last year and each employer withheld Social Security tax independently. Since I didn't hit the wage cap ($160,200 for 2023), I should have paid 6.2% on all my wages combined. But when I added up all my W-2s, I realized one employer had miscalculated and I was actually over-withheld by about $400. The good news is that if you over-pay Social Security tax due to multiple employers, you get that money back as a credit when you file your return. It shows up on your tax software automatically if you enter all your W-2s correctly. Just another reason why it's so important to understand that OASDI/Medicare are separate from income tax - each has its own rules and caps that you need to track, especially if your employment situation is complicated!