If your net income surpasses the $90,997 minimum income threshold (for the 2024 income year), you may be subject to an Old Age Security (OAS) clawback. This is also referred to as the OAS pension recovery tax.
The clawback amount is 15% of the difference between your actual income and the threshold amount.
Key Takeaways
- An OAS clawback is triggered when an individual's net annual income exceeds a certain threshold. The minimum income threshold for the 2024 income year is $90,997.
- The amount that's clawed back is calculated as 15% of the difference between your actual income and the threshold amount.
- Strategies for reducing potential clawback amounts include deferring OAS payments, income splitting with a spouse or partner, withdrawing from your TFSA instead of your RRSP, and selling off stocks before collecting OAS.
What is the OAS clawback?
The Old Age Security pension recovery tax, commonly referred to as OAS clawback, occurs when your total income is above the yearly threshold set by the Canadian government. For the 2024 income year, that threshold is $90,997.
If you made more than this amount in 2024 but less than the maximum income threshold of $148,451 (ages 65 – 74), your payments will be reduced by 15% of the difference between the threshold and your total income.
When do clawbacks happen?
The recovery tax period for 2024 is July 2025 to June 2026.
The recovery tax period or clawback period is the time when the government recoups the tax. This is the timeframe during which you'll be repaying the 15%.
Why do OAS clawbacks happen?
OAS clawbacks occur to reduce benefits for high-income seniors, ensuring that the Old Age Security program is targeted at those who need it most. This system helps manage the program's costs and ensures it remains sustainable. Essentially, it's a way to balance support and fairness in the distribution of benefits.
OAS clawback thresholds
If you make over the minimum threshold for a specific income year, your monthly payments will start to be reduced by OAS clawbacks. If you make more than the maximum threshold, you'll stop receiving OAS payments altogether.
| Income year | Min income (will begin paying recovery tax) | Max income for ages 65-74 (will no longer receive OAS payments) | Max income for ages 75+ (will no longer receive OAS payments) |
|---|---|---|---|
| 2022 | $81,761 | $134,626 | $137,331 |
| 2023 | $86,912 | $148,065 | $148,179 |
| 2024 | $90,997 | $148,451 | $154,196 |
Note: This table was last reviewed on December 27, 2024.
What income is included in OAS clawbacks?
The CRA calls the income they take into account when calculating OAS clawbacks your "net world income."
Here are a few examples of what's included in this category:
- Employment salary
- Business income
- Social security
- Pensions
- Capital gains
- Rental property income
- Earned interest
- Dividends
OAS clawback calculator
Calculating how much of your pension will be clawed back involves determining 15% of the difference between your income and the threshold amount.
The formula looks like this:
(Your income - Threshold amount) * 0.15 = Clawback amount
Clawback amount / 12 = The amount deducted from your monthly OAS payment
Example OAS clawback
Let's say you made $95,000 in the 2024 tax year, in which the recovery tax period is July 2024 to June 2025.
Using the formula above, you'd have to repay $600.45 for that tax year, which is like taking $50.04 from each of your OAS payments.
($95,000 - $90,997) * 0.15 = $485.85
$485.85 / 12 = $50.04
And if we look at a more extreme example with an income of $140,000, the amount you'd have to repay increases to $7,350.45, or $612.54 per month.
($140,000 - $90,997) * 0.15 = $7,350.45
$7,350.45 / 12 = $612.54
4 ways to reduce your OAS clawback
To limit the amount that's clawed back from your OAS payments, you can try deferring OAS payments or use an income splitting approach, or you can choose to focus more on your investments by making TFSA instead of RRSP withdrawals or selling off stocks before collecting OAS.
1. Defer your OAS payments
Since you have to have made at least $90,997 in 2024 in order to even be worrying about OAS clawbacks, you may not even need your OAS payments in the first place.
If this is the case, consider deferring your OAS payments. The payments can be deferred for up to 5 years after you turn 65, though you must state your intention to defer your payments no later than 6 months after you turn 65.
This will also increase the amount you receive once the payments start coming in. For every month you delay, your payment will be increased by 0.6%, up to a maximum increase of 36% when you're 70.
For example: Say you would've been earning $500 a month but deferred payments until you turned 70. You'd instead get $680 every month – and may not have to worry about clawbacks if your income situation has changed.
But don’t forget: You're not eligible for OAS benefits while you're deferring payments.
2. Split your income with your spouse
With this strategy, the spouse or partner who earns more money can transfer part of their income to the other partner. This way, come tax time, it looks like they both make a similar amount.
If the receiving partner is under the age of 65, they're pretty much limited to only splitting income from their RRSP. At age 65, however, RRIFs are also eligible for transferring and splitting.
Either way, if one spouse earns significantly more than the other and would therefore be in a higher tax bracket, income splitting can be especially beneficial. A lower tax bracket means a lower bill.
3. Withdraw from your TFSA instead of your RRSP
Since the OAS recovery taxes are based on your taxable income, anything you withdraw from your TFSA won't count – that money was already taxed when you made your contributions. RRSP withdrawals, on the other hand, are taxed at your marginal rate at the time of withdrawal, so it'll increase your income amount.
Playing around with how much you withdraw and prioritizing your TFSA while your other income sources are still high is one way you can reduce OAS clawbacks.
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- The tax-free benefits of a TFSA
- No minimum balance or fees to worry about
- Low risk means low reward
- Though convenient, still have some registered-related hoops to jump through
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- You must be a Canadian resident
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4. Sell off your stocks before you start collecting OAS payments
Capital gains and dividends are both included in the income calculations for OAS payments.
If you want to lower your income for the years you'll be earning OAS, consider selling off your stocks before the year you turn 65.
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Old Age Security (OAS) payments are monthly payments provided to Canadians aged 65 and older to help supplement their income, pay their bills, and make ends meet. These payments are made towards the end of each month and the next one will be October 29, 2025.
How much you get in your OAS payments depends on how long you've been living in Canada.
You'll need to meet these eligibility requirements as well:
- Be at least 65 years old
- Live in Canada as a citizen or legal resident
- Have lived in Canada for at least 10 years (after the age of 18)
- Make less than either $148,451 or $154,196, depending on your age
The maximum amount that someone under 75 can receive is $727.67, and those over 75 can receive a max of $800.44.
To determine the exact amount you're entitled to, you can use the federal government's benefits calculator, here in the "Estimate your monthly benefits" section.
Typically, eligible Canadians receive a notice from Service Canada a month or so before their 64th birthday to inform them of their eligibility for OAS payments. They begin receiving these funds automatically, after they turn 65.
If you don't receive such a notice, you can always log into your My Service Canada account and find the application forms to fill out.
FAQ
What is OAS?
OAS stands for "Old Age Security." It's a government benefit for Canadians over the age of 65 (though you can defer your payments until you're 70 years old). Enrollment is usually automatic and payments typically begin when you turn 65.
When do I get OAS payments?
Eligible Canadians will receive their OAS payments near the end of each month. The next payment will be made on October 29, 2025 – if you receive payment via cheque, you'll likely receive it a week or so after this date.
Is OAS taxable?
Yes, OAS payments are considered taxable income. It's also subject to clawbacks (what the government calls pension recovery tax) on your OAS payments if your income surpasses certain thresholds. The OAS clawback threshold amount changes every year.
What is OAS clawback?
The OAS clawback is also called OAS pension recovery tax, applies to OAS recipients, and happens when you exceed the annual income limit. You're required to pay back 15% of the difference between the minimum limit and your annual income.
How is OAS clawback determined?
To determine your OAS clawback, calculate 15% of the difference between your income and the minimum income threshold (which varies each year), then divide by 12. The difference will give you your monthly recovery tax.
Is OAS clawback based on family income?
No, OAS clawbacks are based on your individual income, not family income. This includes your salary plus any capital gains and/or interest earned, and your spouse or partner's income isn't taken into account at all.
How can I minimize my OAS clawback?
One of the easiest ways to minimize OAS clawback is to defer your payments until your income is lower. This only works if your income lessens during the deferral period, which can only be for a maximum of 5 years.
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