As retirement approaches, one of the most valuable benefits available to Canadian seniors is the Old Age Security (OAS) pension. But for higher-income earners, there’s a catch: if your income exceeds a certain amount, you could be forced to repay part or even all of your OAS pension. This repayment is known as the OAS clawback, or more formally, the OAS Recovery Tax.
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With the income threshold for OAS clawback increasing in 2025 to $93,454, it’s critical to understand how this impacts your retirement plan. In this article, we’ll break down exactly how the OAS Clawback 2025 works, who it affects, and most importantly—how to reduce or avoid it with smart financial strategies.
What is the OAS Clawback?
The OAS clawback is a government mechanism that reduces OAS benefits for retirees whose income exceeds a federally set threshold. Rather than being a one-time tax, it’s applied monthly—reducing the amount of OAS you receive the following year, based on your net income from the previous year.
What’s New in OAS Clawback 2025?
For the 2025 income year, the clawback kicks in if your 2024 net income exceeds $93,454.
Here are the key numbers to know:
| OAS Clawback 2025 Thresholds | Amount |
|---|---|
| Clawback Begins (2025) | $93,454 |
| Full Clawback (Ages 65–74) | $151,668 |
| Full Clawback (Ages 75+) | $157,490 |
| Clawback Rate | 15% of excess income |
If your net income goes above the maximum threshold, you’ll lose the entire OAS benefit for that year.
OAS Clawback 2025: Example Calculation
Let’s break down how the clawback would work for someone earning above the threshold:
Example: A 68-year-old retiree earns $120,000 in 2024.
- Excess Income:
$120,000 – $93,454 = $26,546 - Clawback Amount:
15% of $26,546 = $3,981.90 - Adjusted OAS (Assuming $8,000/year):
$8,000 – $3,981.90 = $4,018.10/year - Monthly OAS Payment After Clawback:
$4,018.10 ÷ 12 = $334.84/month
If this retiree earned more than $151,668, the OAS would be fully clawed back, and no monthly payment would be issued in 2025.
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Should You Delay OAS to Avoid the Clawback?
Delaying your OAS payments can be a strategic move. For every month you delay beyond age 65, your monthly OAS increases by 0.6%, up to a maximum of 36% if you wait until age 70.
Pros of delaying:
- Larger OAS payments later in life
- May avoid clawbacks during high-income early retirement years
- Gives time for RRSP/RRIF drawdowns before OAS kicks in
Note: Even delayed, OAS is still subject to the clawback if income remains above the threshold.
The OAS Recovery Tax and Canadians Abroad
The OAS Recovery Tax applies even if you live outside Canada, particularly if you’re in a country where Canadian pensions are taxed at 25% or more. This means your worldwide income—not just Canadian income—is used to determine your clawback.
Make sure to review:
- Your international tax treaty status
- Net world income reporting rules
- Tax filing requirements for non-resident Canadians
What Types of Income Trigger the Clawback?
The OAS clawback is based on your net income, which includes:
- Employment or self-employment income
- RRSP and RRIF withdrawals
- Pension income
- Dividends, interest, and capital gains
- Rental or business income
Income that doesn’t trigger a clawback:
- Withdrawals from a Tax-Free Savings Account (TFSA)
- Gifts or inheritances
- Most lottery or insurance winnings
Strategies to Reduce or Avoid the OAS Clawback in 2025
1. Split Income with a Spouse
If you’re married or in a common-law relationship, you can split eligible pension income with your partner. This reduces your reported income and may bring you below the clawback threshold.
2. Withdraw from RRSPs Early
Convert your RRSP into a RRIF and draw it down before starting OAS. This keeps RRIF withdrawals lower in later years and avoids pushing you over the clawback limit when OAS begins.
3. Maximize Your TFSA
Use a TFSA as your primary savings vehicle in retirement. Growth is tax-free, and withdrawals don’t count as income, so they won’t affect your OAS benefits.
4. Defer OAS Until Age 70
If you can afford to wait, delaying your OAS:
- Increases your monthly payout
- Helps avoid clawbacks in high-income years
- Can be combined with RRIF withdrawals or income reduction strategies
5. Time Asset Sales or Large Withdrawals Carefully
Avoid triggering the clawback by:
- Spreading large capital gains over multiple years
- Deferring the sale of investment properties
- Managing lump-sum withdrawals in low-income years
Protect Your OAS with a Financial Plan
Retirement income planning is not one-size-fits-all. The OAS Clawback 2025 adds complexity that can be costly if ignored. A certified financial planner can help:
- Structure income in a tax-efficient way
- Develop a withdrawal schedule that minimizes clawbacks
- Balance RRSP, RRIF, TFSA, and non-registered accounts strategically
Final Thoughts: Take Control of Your Retirement and Keep More of Your OAS
The OAS Clawback 2025 doesn’t have to eat into your retirement income. With early planning and smart financial moves, you can stay under the threshold—or at least reduce the amount you have to repay.
Whether you’re planning your retirement, already collecting OAS, or thinking of delaying, it’s not too late to make tax-efficient decisions that maximize your pension and minimize your clawback.
Need help protecting your OAS in 2025?
Talk to a financial planner who can tailor a retirement income strategy just for you.