Understanding the OASDI Tax Cap
The Federal Insurance Contributions Act (FICA) imposes two separate taxes on wages:
- Social Security (OASDI): 6.2% withheld from employees, but strictly capped at $176,100 of gross annual earnings in 2025/2026. The maximum Social Security tax any worker pays is $10,918.20 per year.
- Medicare: 1.45% withheld with no wage cap whatsoever (plus an additional 0.9% surtax on earnings over $200,000 for single filers).
Because of this cap, high earners experience a noticeable bump in their bi-weekly or monthly take-home pay during the final quarter of the year.