OAS Clawback Canada: How to Avoid It in 2025

The OAS recovery tax explained — the threshold, how much you lose per dollar of income, and the strategies that keep your full OAS intact.

What Is the OAS Clawback?

The OAS clawback — officially called the OAS Recovery Tax — requires high-income retirees to repay part or all of their OAS pension. For every dollar of net income above the threshold, you repay 15 cents of OAS. It is applied based on your prior-year net income (from your tax return) and clawed back through reduced OAS payments in the following payment year.

2024–2025 Clawback Thresholds

Net Income Level	OAS Impact
Below $90,997	No clawback — full OAS retained
$90,997–$148,065 (approx.)	15 cents per dollar above threshold repaid
Above ~$148,065	Full OAS clawed back — no OAS received

Note: The threshold is indexed to inflation annually. The 2024 threshold is $90,997; the 2025 threshold will be slightly higher once announced.

What Counts as Net Income for Clawback Purposes?

Net income for OAS clawback includes:

• CPP and workplace pension income
• RRSP and RRIF withdrawals
• Employment and self-employment income
• Investment income (interest, dividends, capital gains)
• Rental income

What does NOT count:

• TFSA withdrawals
• OAS itself (not included in the clawback calculation)
• GIS payments

Strategy 1: Maximize TFSA Withdrawals

TFSA withdrawals are completely tax-free and do not appear on your income tax return. Drawing retirement income from a TFSA rather than a RRIF keeps your net income below the clawback threshold. A retiree with $200,000 in a TFSA can fund $15,000/year of tax-free income indefinitely without touching the clawback threshold.

Strategy 2: Pension Income Splitting

If your spouse has a lower income, you can allocate up to 50% of eligible pension income (including RRIF withdrawals after age 65) to their tax return. This directly reduces your net income and can bring you under the clawback threshold. A retiree with $110,000 of net income who splits $20,000 to a spouse now has $90,000 — below the threshold.

Strategy 3: RRSP Meltdown Before CPP/OAS

In the years between retirement and age 65, draw down your RRSP while your income is lower. By reducing your RRSP/RRIF balance, future mandatory withdrawals will be smaller, keeping your income below the clawback threshold throughout your 60s and 70s.

Strategy 4: Manage Capital Gains Timing

Large capital gains from selling property or investments can spike net income and trigger or worsen OAS clawback. Spreading dispositions over multiple years — or using capital losses to offset gains — keeps income smooth and below the threshold.

Strategy 5: Defer OAS to Age 70

Deferring OAS to 70 gives you 5 years to draw down RRSP/RRIF at lower income levels, potentially reducing your RRIF balance and future mandatory withdrawals enough that your income is sustainably below the clawback threshold when OAS finally starts.