The OAS clawback — officially called the Old Age Security Recovery Tax — reduces your OAS benefit when your net income exceeds a government-set threshold. For 2025, that threshold is $90,997. For every dollar of net income above the threshold, you repay 15 cents of OAS. If your income is high enough, your entire OAS benefit is clawed back.

What Is OAS and Who Gets It?

Old Age Security (OAS) is a monthly federal benefit available to most Canadians aged 65 and older who meet residency requirements. Unlike CPP, OAS is not based on your work or contribution history — it is funded from general tax revenue and paid to eligible Canadians regardless of whether they ever worked.

The maximum monthly OAS payment for 2025 is approximately $727 for those aged 65 to 74, and slightly higher for those 75 and older due to the 10% enhancement introduced in 2022.

How the Clawback Is Calculated

The clawback is triggered when your net income — line 23600 on your tax return — exceeds the annual threshold. Here is how the math works:

  • 2025 threshold: $90,997
  • Clawback rate: 15% of every dollar above the threshold
  • Full clawback point: approximately $148,179 (at this income level, the entire OAS benefit is repaid)

Example: If your net income is $110,997, you are $20,000 above the threshold. At 15%, that is $3,000 in OAS repayment for the year — or $250 per month withheld from your OAS payments.

The CRA estimates your expected clawback based on the prior year’s income and adjusts your monthly OAS payments accordingly. If your actual income differs, you reconcile on your tax return.

What Counts as Net Income for Clawback Purposes?

The clawback is based on your total net income — not just investment income or pension income. This includes:

  • CPP and OAS payments themselves
  • RRIF and RRSP withdrawals
  • Registered pension plan income
  • Employment income
  • Rental income
  • Capital gains (taxable portion)
  • Dividends (grossed-up amount, not just what you received)

The grossed-up dividend rule catches many retirees off guard. Canadian eligible dividends are grossed up by 38% for tax purposes, meaning $50,000 of actual dividends reports as $69,000 of income — pushing you closer to or past the clawback threshold even if your actual cash received was well below it.

When Does the Clawback Actually Hit?

OAS begins at age 65. The clawback applies to the benefit year running July to June, based on the prior calendar year’s income. So your OAS payments from July 2025 through June 2026 are adjusted based on your 2024 tax return.

If your income is variable — for example, you sold a property or took a large RRSP withdrawal in a single year — you may face a clawback in the following benefit year even if your income typically falls below the threshold.

Strategies to Reduce or Avoid the OAS Clawback

Draw Down Your RRSP Before OAS Begins

Every dollar you withdraw from your RRSP before age 65 reduces the future RRIF balance that will generate mandatory taxable income in retirement. Smaller RRIF withdrawals later means lower net income during OAS years.

Defer OAS to Age 70

For every month you delay OAS past age 65, your benefit increases by 0.6%. At age 70, your OAS is 36% higher than it would have been at 65. If your income is near the clawback threshold, deferring OAS also gives you five additional years to manage your income before the benefit begins.

Income Split with Your Spouse

Pension income splitting can shift up to 50% of eligible pension income to a lower-income spouse, reducing the higher earner’s net income and potentially keeping them below the threshold. CPP sharing is also available and can achieve a similar result.

Use Your TFSA Strategically

TFSA withdrawals are not included in net income. Shifting assets from non-registered or RRSP accounts into a TFSA over time — particularly in lower-income years — creates a future income source that has no impact on the clawback calculation.

Manage Capital Gains Timing

If you have non-registered investments with unrealized gains, staggering dispositions across multiple tax years rather than triggering large gains in a single year can prevent a one-time spike that triggers or deepens the clawback.

Key Takeaways

  • The OAS clawback applies when net income exceeds $90,997 (2025), at a rate of 15 cents per dollar
  • Net income for clawback purposes includes RRIF withdrawals, CPP, capital gains, and grossed-up dividends
  • The clawback is based on the prior year’s income — variable income years can cause unexpected reductions
  • RRSP drawdown before 65, TFSA use, income splitting, and OAS deferral are the main tools to manage it
  • Clawback planning works best when it starts well before age 65, not after OAS has already begun

This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP® professional.

This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP® professional. Odyssey Wealth Inc. is regulated by CIRO through Designed Wealth Management.