How the OAS Clawback Works
The OAS recovery tax is a mechanism by which the federal government reduces Old Age Security benefits for higher-income retirees. It is not technically a clawback of money already paid — it is a reduction applied to the following year's OAS payments based on the current year's net income. The calculation is straightforward: for every dollar of net income above $93,454 (the 2025 threshold), OAS is reduced by $0.15.
Net income for this purpose is the figure on line 23600 of your T1 return — total income minus deductions such as RRSP contributions, union dues, and pension income deduction, but before personal tax credits. See the Service Canada OAS recovery tax page for official guidance and current thresholds.
Counts (included in net income): CPP pension, OAS pension itself, RRIF withdrawals, RRSP withdrawals, employment income, investment income (dividends, interest, capital gains at 50%), rental income, pension income, and most other taxable income sources.
Does NOT count: TFSA withdrawals — these are entirely invisible to the tax system and have zero impact on your OAS or any other income-tested benefit. GIS itself also does not count.
| Net Income | Excess Over $93,454 | Annual OAS Clawback (15%) | OAS Remaining (of $8,732/yr max) |
|---|---|---|---|
| $93,454 or less | $0 | $0 | $8,732 — full OAS |
| $100,000 | $6,546 | $982 | $7,750 |
| $110,000 | $16,546 | $2,482 | $6,250 |
| $125,000 | $31,546 | $4,732 | $4,000 |
| $140,000 | $46,546 | $6,982 | $1,750 |
| $151,668+ | $58,214+ | $8,732+ — full clawback | $0 — OAS eliminated |
Illustrative. Based on 2025 OAS maximum of $727.67/month and threshold of $93,454. Individual OAS entitlement may be lower depending on years of Canadian residence. Consult a licensed advisor and CPA for personalized calculations.
Five Legal Strategies to Protect Your OAS
All strategies below are illustrative — the effectiveness of each depends on your income structure, province, account balances, and marital status. Consult a licensed advisor and CPA before implementing any strategy. These are not tax advice — they are educational examples of commonly used legal income-management approaches.
Use TFSA Withdrawals Instead of RRIF Withdrawals
TFSA withdrawals are completely invisible to the tax system — they do not appear on your return, do not affect line 23600 (net income), and have zero impact on OAS clawback, GIS eligibility, or any other income-tested benefit. If you have TFSA room and savings, supplementing income with TFSA withdrawals instead of RRIF withdrawals can keep net income below the clawback threshold. Consult a licensed advisor to model the optimal RRIF/TFSA mix for your situation.
Pension Income Splitting with Your Spouse
At age 65 and older, up to 50% of eligible pension income (including RRIF income) can be allocated to a spouse on your joint tax return. If your spouse is in a lower tax bracket or well below the OAS threshold, splitting income reduces your reported net income — potentially below $93,454. This is done via Form T1032. The strategy works best when one spouse has significantly higher income than the other. Consult a CPA for the optimal split in your specific situation.
Strategic RRSP Contributions (If Still Working)
If you are still earning employment income at 71 or younger, RRSP contributions reduce net income directly. An RRSP contribution of $16,546 would eliminate the entire OAS clawback for the illustrative $110,000 earner — in addition to providing the regular tax deduction benefit. The contribution reduces line 23600 of your return, bringing net income to $93,454. RRSP room must be available. Consult a CPA for timing and contribution strategies.
Defer CPP to Reduce Dependency on Other Taxable Income
CPP counts as net income and contributes to the clawback calculation. Paradoxically, delaying CPP to 70 (for a higher guaranteed amount) may allow a retiree to draw down their RRIF between ages 65–70 at a lower bracket — reducing the mandatory RRIF minimums that would later trigger the clawback. This is the RRIF early drawdown strategy: a smaller RRIF at 72 produces lower mandatory minimums, keeping CPP + RRIF + OAS below the clawback threshold. See our RRIF strategy article for the full framework. Consult a licensed advisor to model the interaction between CPP timing and RRIF minimums.
Manage Capital Gains Realizations Strategically
Capital gains on non-registered investments are included in net income at the 50% inclusion rate. A $60,000 capital gain adds $30,000 to net income. Timing large capital gains realizations (property sales, non-registered investment portfolios) to avoid overlapping with other high-income years can prevent an otherwise avoidable OAS clawback. Tax-loss harvesting can also offset gains. Consult a CPA well before any planned significant asset disposition.
The 2025 OAS recovery tax (clawback) threshold is $93,454 of net income (line 23600 of your T1 return). For every dollar of net income above this threshold, OAS is reduced by 15 cents. The maximum OAS in 2025 is $727.67/month ($8,732/year). Full OAS elimination occurs at approximately $151,668 of net income. The threshold is indexed to inflation and adjusted each year. See Service Canada's OAS recovery tax page for current and upcoming thresholds.
Legal strategies to reduce net income below the clawback threshold include: using TFSA withdrawals instead of RRIF withdrawals (TFSA income is not included in net income), pension income splitting with a spouse (up to 50% of eligible pension income), RRSP contributions if still earning employment income, managing capital gains realizations to avoid large income spikes, and strategic RRIF drawdown before mandatory minimums begin. The most effective strategy depends on your income sources, account balances, marital status, and province. Consult a licensed advisor and CPA for an approach specific to your situation. This article is educational only — not tax advice.
No. TFSA withdrawals are not included in net income for any purpose. They do not appear on your tax return, do not affect line 23600, and have zero impact on OAS, the Guaranteed Income Supplement (GIS), or any other income-tested government benefit. This makes the TFSA uniquely valuable in retirement income planning — it provides tax-free income that is completely invisible to benefit clawback calculations. This is one of the primary reasons maximizing TFSA contributions during working years is a priority for anyone concerned about retirement income thresholds.
OAS can be deferred up to age 70. For each month deferred past age 65, the OAS payment increases by 0.6% — a maximum increase of 36% at age 70. In 2025 terms, maximum OAS at 70 would be approximately $989.63/month (illustrative, based on $727.67 × 1.36). For higher-income retirees who would face a significant clawback from ages 65–70, deferring OAS has a double benefit: the higher payment is received when income is lower (post-RRIF drawdown), and the initial years of OAS exposure — often the highest-income years — are avoided. Whether deferral makes financial sense depends on your health, income, and other retirement income sources. Consult a licensed advisor to model the break-even and optimal deferral decision for your situation.
RRIF minimum withdrawals count as net income and directly contribute to the OAS clawback calculation. As RRIF minimums increase with age (from 5.40% at 72 to 11.92% at 90), they can push total net income progressively above the clawback threshold even when CPP and OAS alone would not. A retiree with a large RRIF and guaranteed income sources (CPP + OAS + pension) may see their net income rise into the clawback zone every year for the rest of their life without any change to spending — simply because the mandatory RRIF withdrawal floor is rising. This is the core reason early RRIF drawdown planning (reducing the RRIF balance before mandatory minimums begin) is one of the highest-value retirement strategies for Canadians with significant registered savings. See our RRIF withdrawal strategy article for the full framework.
The Bottom Line
The OAS clawback is not a punishment — it is a tax design feature that reduces benefits for higher-income retirees. But for retirees whose income is near the $93,454 threshold, even modest income management can preserve thousands of dollars in annual OAS payments. At $2,482 per year for the illustrative $110,000 earner, eliminating the clawback entirely — through TFSA withdrawals, pension splitting, or RRSP timing — is the equivalent of a guaranteed 15% return on every dollar of income reduction below the threshold. That is a compelling mathematics that warrants a conversation with a licensed advisor and CPA. All figures in this article are illustrative only. Consult a licensed advisor and CPA before making any decisions about retirement income sequencing.