The OAS clawback — officially called the OAS Recovery Tax — is a mechanism that gradually reduces Old Age Security payments for higher-income Canadian seniors. If your net income exceeds a threshold set by the government, you must repay a portion of your OAS. Understanding how it works and how to plan around it can save you thousands of dollars annually.
The OAS recovery tax is calculated as 15% of the amount by which your net income (line 23600 on your tax return) exceeds the annual threshold. For 2025, that threshold is approximately $90,997.
Example: If your net income is $110,000 in 2025:
The Canada Revenue Agency (CRA) assesses your prior year's net income from your tax return. If you exceeded the threshold, they reduce your OAS payments from July of the following year through June the year after. This means there is always a one-year lag between earning the income and having OAS reduced.
If you know your income will be very high in a given year (e.g., a large RRSP withdrawal, property sale, or business income), you can voluntarily request that CRA reduce your OAS payments in real time to avoid a large recovery tax bill.
The OAS clawback is based on your net income (line 23600), which includes virtually all income sources:
Notably, TFSA withdrawals are NOT included in net income and do not trigger the OAS clawback. This is one of the most important features of the TFSA for higher-income retirees.
If you retire before 65 or defer OAS beyond 65, you have an opportunity to draw down your RRSP at lower tax rates before the clawback threshold applies. By reducing your RRIF balance, you reduce future mandatory withdrawals that would otherwise push your income above the threshold.
If your spouse has lower income, you can allocate up to 50% of eligible pension income (RRIF from age 65, DB pension) to them. This can keep your individual net income below the $90,997 threshold while your combined household income remains the same.
Replace taxable RRIF or investment income with tax-free TFSA withdrawals. TFSA income doesn't affect OAS eligibility, GIS, or other income-tested benefits. Building a large TFSA specifically to fund retirement spending without triggering clawbacks is a highly effective long-term strategy.
If you're working or have high investment income between 65 and 70, deferring OAS means you avoid collecting a benefit that would be partially or fully clawed back anyway. Each month of deferral also permanently increases your OAS by 0.6%.
Charitable donations generate tax credits and can reduce net income slightly, though the income deduction is limited. Donations of publicly traded securities directly to charity are more tax-efficient — the capital gain is eliminated and the full value generates a donation credit.
Realize capital gains in years when your other income is lower. Avoid large one-time income events (RRSP/RRIF withdrawals, property sales) in the same year if they would push you significantly over the threshold.
| Net Income | OAS Reduction | OAS Retained (approx.) |
|---|---|---|
| $90,997 or less | None | Full ~$8,556/year |
| $100,000 | ~$1,350 | ~$7,206 |
| $110,000 | ~$2,850 | ~$5,706 |
| $120,000 | ~$4,350 | ~$4,206 |
| $130,000 | ~$5,850 | ~$2,706 |
| $148,000+ | Full clawback | $0 |
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Open KOHO Free — Code 45ET55JSYAThe clawback is designed to means-test OAS and redirect benefits toward seniors who need them most. Critics argue the threshold is not high enough, especially in high-cost cities where $91,000 does not represent true wealth. Proponents argue that well-off retirees do not need a government pension supplement. Regardless of the policy debate, planning around the threshold is straightforward and effective for most Canadians.