March 1, 2024

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How to deduct OASDI on your paycheck

If you don’t understand check stubs in English, consider that OASDI is the old-age, disability, and survivor insurance commonly known as social security. The payment of these programs is carried out through a tax imposed by the United States government on earnings that the employer withholds.

So the deduction in your paycheck is a true reflection of the value that was withheld.

What is the deduction on check stubs in English?

For the payment of OASDI taxes, the deduction on the check stubs in English always depends on the employee’s tax rate.

For example, before 2011, the rate was 6.2%, and in this same year, it was reduced to 4.2%, and since then, there have been no changes in the reduction of the rate.

So, for example, if your paycheck is for $2,500, OASDI will withhold $105, which corresponds to OASDI’s withholding.

The limits of OASDI

OASDI has limits because the withholding does not apply to your annual income over a specific amount, which is adjustable according to inflation each year.

Since 2011, when the withholding percentage was modified, the amount on which the OASDI tax is applicable was also established.

Then the OASDI tax is calculated on an annual income that exceeds 160,800 dollars.

Who pays the OASDI tax?

When you receive a paycheck, the employer pays a portion of the OASDI tax on your behalf. On your income, the employer pays 6.2% on your behalf.

This part that your employer pays has nothing to do with your paycheck but is the cost that the company must pay for having employed you. For example, if your employer paid you 2,500 dollars, the company pays the government 155 dollars for the tax to the OASDI,

The OASDI deduction

The employer withholds federal income taxes from your paycheck separately from the OASDI tax. Remember that you can’t request deductions for an OASDI tax reduction as you can with the federal income tax, and even your marital status does not matter.

A clear example is the presentation of a joint and an individual return since both works similarly on the OASDI tax rate.

US payroll tax deductions

About the check stubs in English, if you want to calculate the deductions and withholdings of the paycheck.

Gross salary is the actual value that the employer owes the employee, and net salary is the value of the paycheck you receive.

Once the gross salary is calculated, the amount that corresponds to the social security tax or FICA, to the local and state federal income tax, and other deductions, if applicable, is deducted and withheld.

On the other hand, keep in mind that there is almost no difference between withholdings and deductions, except that withholdings are directed to state or federal taxes. In contrast, deductions are calculated on the amount that can be deducted from the employee’s salary, such as the cost of medical care, retirement benefit, donations, or special funds.

How to calculate deductions

When calculating deductions, you should always use gross pay:

Step 1: Calculate the gross payment. The paycheck begins with the value of the gross salary, which is the total. If you are salaried, the annual value is divided by the pay periods.

If you are an hourly employee, the value of the hours you worked at the rate, including overtime.

Step 2: Calculate the value of the FIT or federal income tax withholding.

Step 3: Calculate federal income tax withholding.

To know the withholding, you must consider the employee’s withholding allowance certificate and the W-4 form you completed.

Step 3 – Calculate Medicare and Social Security deductions. Deduct the paycheck taking into account that the value of the FICA is a tax of 15.3% of the gross salary.

The 7.65% is half of the total that is withheld from the paycheck and is the percentage that the employer pays.

Also, keep in mind that the Social Security Administration imposes a limit per year on taxes. Therefore it is not convenient to deduct many taxes on the highest income of the employee.

In the case of high-income employees, consider the Medicare tax deduction, which begins when the employee reaches the payment value determined for the year. 0.9% is the additional tax on the gross salary, which starts at different levels according to the status of the employee entered in the W-4, and the employer does not pay additional taxes.

Step 4: Determine state income tax deductions. It would help if you did your research to determine the value of these deductions and then submit them to the appropriate state or local tax authority.