The OAS clawback — officially called the Old Age Security Recovery Tax — reduces or eliminates Old Age Security payments for higher-income seniors. If your net income in retirement exceeds a certain threshold, the government claws back a portion of your OAS at a rate of 15 cents per dollar. For 2025, the clawback threshold is approximately $90,997. With good planning, many retirees can minimize or completely avoid this tax.
For every dollar of net income above the clawback threshold (~$90,997 in 2025), your OAS is reduced by 15 cents. At the full OAS of $727/month ($8,724/year), the clawback eliminates OAS entirely when income reaches approximately $148,179 ($90,997 + $8,724 / 0.15 = approximately $148,000).
The clawback is based on your "net world income" from the previous year. This includes CPP, OAS, RRIF withdrawals, employment income, rental income, investment income, and foreign pension income. It does not include TFSA withdrawals, the principal portion of annuity payments, or other specific exclusions.
The calculation works like this: If you have net income of $105,000 in 2024, you are $14,003 above the $90,997 threshold. The clawback is $14,003 x 15% = $2,100. Your annual OAS is reduced by $2,100 — from $8,724 to $6,624. This clawback is recovered through your income taxes when you file.
The effective tax rate for income in the clawback zone is significantly higher than your stated marginal rate. For a senior in the 33% federal bracket, the 15% OAS clawback on top of provincial taxes can create an effective marginal rate of 50-60% on income earned in that band. Every dollar of RRIF withdrawal above the threshold costs both regular income tax AND a 15-cent OAS clawback.
This is why retirement income planning to stay below the OAS clawback threshold is so important. The clawback band represents a particularly expensive zone of taxation.
TFSA withdrawals are not counted as income for any purpose — including the OAS clawback calculation. This is the single most powerful tool for avoiding OAS clawback. If you have a large TFSA, drawing from it instead of your RRIF in years when your income is approaching the threshold preserves your full OAS benefit.
Example: Your RRIF mandatory withdrawal of $8,000 would push your income to $92,000 — $1,003 above the threshold, triggering a $150 clawback. If you instead withdraw $8,000 from your TFSA, your income stays at $84,000 and you receive full OAS. The difference is small in this example but compounds meaningfully if income is consistently near the threshold.
Eligible pension income can be split up to 50% with your spouse on your tax return. "Eligible pension income" includes RRIF withdrawals (for those aged 65+), annuity payments from an RRSP or DPSP, and certain private pension income. CPP cannot be split through pension income splitting (though CPP sharing is possible).
If one spouse has high income near the clawback zone and the other has low income, pension income splitting can shift income from the high earner to the low earner, reducing the high earner's net income below the clawback threshold. This strategy also typically reduces total household taxes.
One of the best long-term strategies is to systematically reduce your RRSP/RRIF balance before large mandatory withdrawals kick in at age 71+. By withdrawing from your RRSP in lower-income years — say, between ages 65 and 70 before CPP and OAS begin — you reduce the eventual RRIF balance and therefore reduce mandatory withdrawals that would trigger clawback later.
The tradeoff: You pay some tax on early RRSP withdrawals. The benefit: Later RRIF mandatory withdrawals are smaller, keeping income below the clawback threshold. This strategy works best when early withdrawals occur in low-income years at a lower tax rate than the clawback-zone rate.
This may seem counterintuitive, but deferring OAS to 70 can be part of a clawback-avoidance strategy if your income between 65 and 70 is already above the clawback threshold. During those years, OAS would be mostly or entirely clawed back anyway. By deferring, you avoid the administrative clawback cycle and receive a 36% higher benefit later when you may have done some income reduction.
This strategy is most effective combined with RRSP meltdown: withdraw heavily from RRSP between 65 and 70, reducing future RRIF mandatory withdrawals, then collect a higher OAS at 70 with a lower RRIF balance pushing less income into the clawback zone.
Donating appreciated securities directly to a registered charity eliminates capital gains tax on the donated securities and generates a charitable donation tax credit. Large donations in a high-income year can reduce net income significantly. If a single large RRIF withdrawal is unavoidable in a given year, pairing it with a charitable donation can keep net income below the OAS threshold.
If you have investment losses in a non-registered account, realizing those losses can offset capital gains and reduce your net income. While this is a limited tool (it only applies to non-registered investment gains), it can be useful for fine-tuning income in years near the clawback threshold.
Consider a single retiree at age 72 with: CPP of $900/month ($10,800/year), OAS of $728/month ($8,736/year), RRIF minimum withdrawal of $50,000/year, and TFSA of $200,000. Total before RRIF = $19,536. RRIF withdrawal of $50,000 brings total to $69,536 — well below the $90,997 threshold.
Now suppose their RRIF has grown to $1,500,000 and the minimum withdrawal is $90,000/year. Total income = $19,536 + $90,000 = $109,536. This is $18,539 above the threshold. The clawback is $18,539 x 15% = $2,781. OAS is reduced from $8,736 to $5,955. Strategy: Substitute $20,000 of RRIF withdrawal with TFSA withdrawal. Income drops to $89,536 — just below the threshold. Full OAS preserved.
The OAS clawback is avoidable for most Canadians with proactive planning. The best tools are: building a large TFSA for tax-free withdrawals, using pension income splitting with a spouse, and managing RRSP/RRIF balances through strategic early withdrawals. The key is to plan ahead — ideally starting in your mid-50s — so you have flexibility when mandatory RRIF withdrawals begin.
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