If you’re receiving Old Age Security (OAS) benefits — or planning to — it’s important to understand how the OAS clawback works. Officially called the OAS Recovery Tax, this rule can reduce or even eliminate your OAS payments if your income exceeds certain thresholds.
Here’s what Canadian seniors need to know.
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What Is the OAS Clawback?
The OAS clawback is a repayment of OAS benefits when your net income before adjustments (Line 23400 of your tax return) exceeds the annual income threshold set by the federal government.
If your income is above that threshold:
- You must repay 15% of the amount over the threshold
- The repayment reduces your OAS benefits
- If your income is high enough, your OAS can be fully eliminated
The clawback is recalculated each year based on your prior year’s income tax return.
When Does the Clawback Start?
The income threshold is indexed to inflation and changes each year.
For recent years:
2024
- Clawback begins at: $90,997
- Full OAS is eliminated at approximately: $148,065
2025
- Clawback begins at: $93,454
- Full OAS is eliminated at approximately: $151,959
2026
- Clawback begins at: $95,323
- Full OAS is eliminated at approximately: $154,708
If your income is below the threshold, you receive your full OAS. Once you exceed it, repayment begins at 15% of the excess.
How the OAS Clawback Is Calculated
The formula is straightforward:
OAS Repayment = 15% × (Net Income – Annual Threshold)
Example (2025):
- Net income: $108,618
- Threshold: $93,454
- Income over threshold: $15,164
- Clawback: 15% × $15,164 = $2,275
In this case, $2,275 of your OAS would need to be repaid.
If the calculated repayment equals or exceeds the total OAS received for the year, your OAS is fully clawed back.
How the Repayment Is Collected
The government does not send you a separate bill during the year.
Instead:
- Service Canada estimates your repayment based on your latest tax return
- Your monthly OAS payments are reduced accordingly
- The withholding is shown on your T4A(OAS) slip
- The final amount is reconciled when you file your tax return
If too much or too little was withheld, the difference is adjusted when you file your taxes.
What Income Counts Toward the Clawback?
The clawback is based on net income before adjustments. This includes:
- CPP/QPP benefits
- Employer pensions
- RRSP and RRIF withdrawals
- Investment income
- Employment income
- Rental income
- Capital gains (taxable portion)
It is your total net income, not just pension income, that determines whether the clawback applies.
Can OAS Be Completely Eliminated?
Yes.
If your income reaches the full clawback threshold for the year, you will lose your entire OAS benefit.
This commonly affects higher-income retirees who have significant pension income, large RRIF withdrawals, investment income, or employment income in retirement.
What Happens If Your Income Drops?
If your income decreases in a future year:
- The clawback is recalculated based on your new tax return
- Your OAS payments may increase again
- You may qualify to receive full OAS if you fall below the threshold
