When you reach retirement, you might start receiving the Old Age Security (OAS) pension. It’s a monthly payment the Canadian government gives to seniors to help them with their living expenses. But if you make too much money, the government might ask you to pay back some or all of that pension. This is called the OAS clawback or the OAS pension recovery tax. Let’s break down how the OAS clawback works, how it will change in 2025, and what you can do about it.
What is the OAS Clawback?
The OAS clawback is triggered when your annual income exceeds a certain threshold. Once your income surpasses this limit, the government will reduce your OAS pension on a monthly basis. Essentially, the more you earn above the threshold, the more of your OAS benefits you will need to repay.
For example: In 2023, if your income is over $86,912, you will start paying back a portion of your OAS. The higher your income, the larger the repayment. If your income reaches significantly above the threshold—say, $150,000—you could potentially lose the entire OAS benefit for that year.
What Happens If You Delay OAS Until Age 70?
You can start receiving your OAS at age 65, but if you wait until age 70, the government will give you bigger monthly payments. This means that for each month you delay past 65, your OAS grows. By the time you turn 70, you’ll be getting a lot more than you would have if you started at 65. This increase is meant to reward you for waiting.
However, even if your OAS payments are bigger, you still have to watch out for the clawback if your income is high. The more income you have above the threshold, the more OAS you’ll have to pay back, even with the larger monthly payments.
How Will the OAS Clawback Change in 2025?
The clawback thresholds change a little bit every year to keep up with inflation and rising costs of living. In 2025, the income limit will go up, so you can earn a bit more before the clawback starts. Here’s what it will look like:
- You will start to pay back your OAS if your income is more than $93,454.
The government reviews your income each year and sets the clawback amount for the following year. So, for the clawback in 2025, they will look at what you earned in 2024.
How Does the OAS Clawback Work?
The OAS clawback is applied as a monthly tax, so instead of paying it all at once, your OAS pension payments will get smaller each month. If you’re way over the threshold, you might see a big reduction in your monthly OAS payment. And if you earn a lot more than the maximum, you could even lose your OAS for that year.
What is the Old Age Security Recovery Tax?
The clawback is also called the Old Age Security pension recovery tax. Here’s how it works:
- You’ll have to repay part or all of your OAS if your income is more than $86,912 in 2023.
- If you live in a country where the tax on Canadian pensions is 25% or more, you will also have to pay this tax, even if your income isn’t as high.
The government looks at your income and decides if you owe this tax. For example, if your annual net world income (this includes all money you earn in Canada and other countries) is more than the threshold, they will reduce your OAS.
Maximum income recovery threshold (income year 2025):
Age 65 – 74: $151,668
Age 75 and over: $157,490
Here’s how it works:
- For incomes between $93,454 and $151,668 (for ages 65-74), or between $93,454 and $157,490 (for ages 75+), a portion of your OAS benefits will be clawed back.
- If your income exceeds the maximum income recovery threshold, you may have to repay the entire amount of your OAS benefits.
Example of How the Clawback Applies
Let’s say you’re 68 years old and have an annual income of $120,000.
- Determine the excess income:
Your income exceeds the minimum threshold ($93,454) by $26,546. - Calculate the clawback rate:
OAS benefits are reduced by 15% of the excess income.- $26,546 × 0.15 = $3,981.90
- Impact on your monthly OAS payments:
Assuming your annual OAS entitlement is $8,000, the clawback reduces this amount to:- $8,000 – $3,981.90 = $4,018.10 annually.
This translates to about $334.84 per month ($4,018.10 ÷ 12).
- $8,000 – $3,981.90 = $4,018.10 annually.
- If income exceeds the maximum threshold:
If your income were above $151,668, your OAS benefits would be completely clawed back, and you would no longer receive monthly payments.
This mechanism ensures that higher-income individuals contribute more back into the system while providing benefits to those with lower or moderate incomes.
How Can You Avoid the OAS Clawback?
It might seem tough to avoid the clawback, but there are some things you can do to lower your income and keep more of your OAS:
- Manage Your Income: If you know you’re getting close to the clawback threshold, you can try to lower your income by spreading it out over different years. For example, you might delay cashing in certain investments or receiving large bonuses.
- Income Splitting: If you have a spouse, you can try to split your income with them. This helps reduce your income for tax purposes and could help you avoid hitting the clawback limit.
- Delay Your OAS Pension: If you wait until age 70 to start your OAS, you’ll get more money every month. This could help make up for the clawback, even if you end up paying some of it back.
- Work with a Financial Planner: A financial planner can help you create a strategy to keep your income below the clawback threshold and make the most out of your OAS.
Take Action for a Worry-Free Retirement
The OAS clawback can seem confusing, but with the right planning, you can manage your income and reduce its impact. If you’re concerned about how the clawback could affect your retirement, now is the time to take control of your financial future.
Book an appointment today with a financial planner to help you make the best decisions for your retirement. Get personalized advice on managing your OAS, taxes, and overall retirement income strategy.
And if you want to dive deeper into retirement planning, don’t forget to purchase “The Art of Retirement” – a comprehensive guide that will help you master the key steps to building the retirement of your dreams. Learn about creating income, making smart financial decisions, and avoiding common mistakes along the way.
Click here to book your appointment and order your copy of “The Art of Retirement” today!
Very informative keep up the good work.
As a senior who will be 77 in 2025 the information on the maximum threshold level of 148451$ was good to see so well explained
You are welcome.
Does the claw back also apply to the overly generous pensions the MPs and other public servants receive.
No, the Old Age Security (OAS) clawback does not affect the pensions that Members of Parliament (MPs) or other public workers get.
Here’s why:
The OAS clawback (also called the recovery tax) only applies to the Old Age Security (OAS) benefit. This benefit is a government pension given to seniors who are 65 years or older.
I plan to retire March 1 2025, will my last years income calculate what I could receive
It depends. Contributions to the Canada Pension Plan (CPP) stop at age 70, even if you continue to work:
Age 60 to 65: You must continue to contribute to the CPP.
Age 65 to 70: You have the option to continue contributing if you choose.
Age 70 or older: You are no longer able to contribute.
The amount of your monthly CPP benefit is determined by the contributions you made between the ages of 18 and when you start receiving your retirement benefits. You can start receiving CPP as early as age 60, though the monthly benefit will be reduced. If you wait until age 70, you’ll receive the maximum monthly amount possible.
This version is clear and concise while maintaining all the important information.
I am starting to think of managing my 2025 income with regards to the OAS clawback threshold. I assumed that threshold for my 2024 income was $90,997. THis article suggests that the same $90,997 will be applied to my 2025 income.
Is that correct?
In 2025, according to Canada.ca, the Old Age Security (OAS) clawback begins for individuals with a taxable income of $90,997. For those aged 65 to 74, OAS benefits are fully phased out at an income level of $148,451, while for individuals aged 75 and older, benefits disappear entirely at $154,196. It’s important to note that the OAS clawback is calculated based on individual income rather than household income.
When one files an OASRI return and you have a balance owing, does this amount have to be repaid or is your OAS future payments reduced to cover the amount owing?
When you file an Old Age Security Recovery Tax (OASRI) return and have a balance owing due to the OAS clawback, the amount you owe typically needs to be repaid directly to the Canada Revenue Agency (CRA).
It is not automatically deducted from your future OAS payments. Here’s how it works:
Balance Owing: If your net income exceeds the OAS threshold for the year, the recovery tax (or clawback) is calculated and reflected in your tax return. You must pay this amount to the CRA when filing your return, just like any other tax liability.
Future Payments: If your income remains above the OAS clawback threshold in subsequent years, your monthly OAS payments will be reduced in the following July-to-June payment cycle based on your reported income. This is a proactive reduction and is separate from repaying the balance owed for a past year’s clawback.
The $90,997 applies to 2024 income. What is the OAS threshold for 2025 income?
$93,454. The Old Age Security (OAS) repayment threshold for the 2025 income year is up from $90,997 in 2024.
Excellent information! I did not apply for OAS until I was 78. I thought my income was too high. It turned out that I received $15350.00 as a retroactive lump sum for 15 months. This period of time was spread over 3 tax years 2022,2023 and 2024. If I have to claim this full amount in 2024 I will exceed the threshold. How does a 1198 form factor in to my situation? Can you explain my options or how should I proceed in my tax return this year? Could you address retroactive OAS payments as a general topic for others?
Since this pertains to tax filing, I recommend consulting your accountant for personalized guidance.
Good afternoon – after the clawback on OAS, is the remainder still taxable income?
Thank you very much!
Yes, the remainder of your Old Age Security (OAS) after the clawback (also known as the OAS recovery tax) is still taxable income.
Do medical expenses and charitable donations get deducted from your income before or after the clawback values are determined. I realize charitable donations usually reduce your taxable income by 15%, so is the OAS clawback calculated before or after the charitable donation write off is taken into account.
The Old Age Security (OAS) clawback, officially known as the OAS Recovery Tax, is calculated based on your Net Income Before Adjustments (line 23400 on your tax return), not your taxable income (line 26000).
How Medical Expenses and Charitable Donations Affect the Clawback
Medical Expenses (Line 33099 & 33199) → These provide a non-refundable tax credit, but they do not reduce your net income before adjustments (line 23400), so they do not impact the OAS clawback.
Charitable Donations (Line 34900) → These also provide a non-refundable tax credit (15% on the first $200, 29% or more beyond that), but they do not reduce line 23400, so they do not impact the OAS clawback either.
In 2025, I no longer have my extra employment that was used to calculate my claw back. Therefore my annual income will be greatly reduced in 2025. However, my income for 2024 will still include the extra employment. How long will it take for my OAS to become a full payment with no claw back?
The OAS clawback (OAS Recovery Tax) is based on your net income from the previous tax year. Since your 2024 income will still include your extra employment income, your 2025 OAS payments will still be subject to a clawback because they are calculated based on your 2024 net income before adjustments (line 23400).
When Will Your OAS Go Back to Full Payment?
The OAS clawback is reassessed annually, meaning your OAS payments from July 2025 to June 2026 will be based on your 2024 income.
Since your 2025 income will be much lower, your OAS will return to full payment starting July 2026 because Service Canada will use your 2025 tax return (filed in spring 2026) to calculate your new OAS benefit.
Good evening
Great information just stumbled upon this site
1) I recently left the working force in Oct 2024 age 66 yrs old
2) 40 years HVAC trade service
3) Currently collecting UI
4) Age now 67 yrs old Dec birthday
5) I will probably re-enter the hvac field once UI ends . Working income would range 75-80k
Question.
1) Would it be a good idea to to start drawing my OAS/GIS at this time while on UI , Apparently OAS/GIS doesn’t effect your UI earnings as OAS is not considered income
2) If I do re-enter the working field and earn 70-80k would this effect my OAS/GIS ? . I understand the working income will affect my UI if I earn it while on UI .
3) Would this working income have any effect on my OAC/GIS monthly amount
Hi Brian, I’d need more details to provide an accurate response. Feel free to email me when you can.
Good morning
I left some questions on the the thread yesterday , they seemed to have disappeared, any ideas where they went ?
Hi Brian, they probably haven’t been approved yet. Approval is required to filter out spam, as many people post it.
Hi,
Scenario: Might need to take an early retirement so will plan to survive on RRSP withdrawals before applying for OAS/GIS at age 65 and QPP at age 70.
Q1: If possible, I would like to withdraw as much of my RRSP before incurring any OAS clawback. I understand the Canadian government will look at my income 1 1/2 years in the past against the OAS threshold. Something about July to June of previous years? Would that be in 2034 & 2035?
Q2: If a person’s birthday is towards the end of December (a few days before 31), how is “age 65” calculated in such a situation when applying for OAS? For example, a few days before the end of Dec 2036, I will turn age 65. It’s the holidays during that time. So does OAS consider me to be age 65 in the year 2036 or the year 2037? When should I apply for OAS?
Thank you in advance.
Hi Cristina, please email me directly. I have a few more questions before I can provide you with an answer.