Government Benefits

Minimizing your Old Age Security Clawback [Update for 2024]

The Old Age Security (OAS) program is the cornerstone of Canada’s retirement income system, along with the CPP. It includes a basic pension that goes to almost all people 65 or older who have lived in Canada for at least ten years over the age of 18.

How much income to expect?

The OAS benefit you receive depends on the number of years you live in Canada after you turn 18. Generally, you receive a full pension if you live in Canada for at least 40 years after age 18. If you live here for less time, you may qualify for a partial pension. With a partial retirement, you’ll receive 1/40th of the full pension for each complete year you live in Canada after you turn 18. OAS is indexed for inflation every January, April, July, and October.

There are 2 levels of OAS as of 2022.

    • For 2024, Canadians age 65 to 74 can receive up to a maximum of $713.34 per month
    • Canadians Age 75 and older can receive up to a maximum of $784.67 per month

Here are all the maximum OAS rates:

YearMaximum Monthly Benefit (Age 65 to 74)Maximum Annual Benefit (age 65 to 74)Maximum Monthly Benefit (Age 75 or older)Maximum Annual Benefit (age 75 or older)

Old Age Security clawback

The Old Age Security clawback, also known as the OAS Recovery Tax, requires high-income retirees (over the age of 65) to repay some or all of their OAS pension. It is interesting to note that the government does not use the word clawback. Instead, they use the OAS recovery or OAS repayment. Despite that, clawback seems to be the more universally understood term.

If your net individual income is above a set threshold, your OAS pension will be reduced. Here are the starting thresholds:

YearOAS Max (Monthly)OAS Max (Annual)OAS Clawback starting thresholdOAS Maximum clawback threshhold

Old Age Security clawback levels are also adjusted each year for inflation. For every dollar ($1.00) of income above the threshold, the amount of the basic OAS pension reduces by 15 cents. For example, if your taxable net income was $95,000 in 2023, then you would be above the clawback threshold by $4003, which in turn would mean that you would lose $600.45 per year of OAS or $50.04 per month. If you qualified for the maximum OAS, you would lose about 6.4% of your OAS pension income. Here are some clawback amounts at different income levels:

2023Monthly OAS ClawbackRevised OAS Payment
IncomeJuly 2024 to Jun 2025July 2024 to Jun 2025

Is OAS clawback a big issue?

On one hand, the answer is yes because it is like an additional 15% tax on top of the current marginal tax rates. However, according to Human Resource Development Canada, only about five percent of seniors receive reduced OAS pensions, and only two percent lose the entire amount.

In terms of planning, if you are one of these people who face losing some of the OAS due to clawback because your income over the age of 65 will be higher than $90,997 for 2024, here are some strategies to help you minimize the future clawback.

  1. Withdraw RRSPs before you turn 65. I know this sounds like unconventional advice, but leaving the RRSPs until after the age of 65 may lead to the loss of OAS which is like an additional 15% tax. One of the benefits of investing in RRSPs is that it is a tax deferral. And while tax deferral is great, it is only good to a point.
  2. Take advantage of income splitting. Probably the biggest impact for married retirees was the introduction of pension splitting in 2007. With pension splitting, spouses can give up to 50% of their pension income to their spouse for tax-splitting purposes. It’s an effective way to reduce your taxable income if you are close to the OAS clawback threshold. For retirees with no pension income, Registered Retirement Income Funds (RRIF) and annuity income qualify for pension splitting after the age of 65. Splitting or sharing Canada Pension Plan (CPP) is another way to income split and minimize or avoid OAS clawback.
  3. Defer your OAS payments up to age 70. Under newer rules, if you think you will reach the clawback threshold between ages 65 to 70, you can elect to defer OAS as late as age 70. Deferring your OAS benefits will increase your eventual payment by 0.6% for every month after your 65th birthday. This works well for those people who are planning to work past the age of 65.
  4. Improve tax efficiency in your non-RRSP investments. When it comes to investment income from non-registered investments, different types of income are taxed differently. Interest income from Guaranteed Income Certificates (GICs) and term deposits are fully taxed. Mutual fund corporations may be an effective alternative to convert income into capital gains instead of interest income.
  5. Limit your dividend income. Dividend income is considered tax efficient because it’s taxed at a lower rate than interest income and, at some levels, capital gains. The problem with dividend income is that getting a tax break requires a dividend gross-up for the dividend tax credit to be applied. As a result, dividend income can actually get you closer to the OAS clawback threshold because the grossed-up income is used. If your income is close to the OAS threshold, be careful about selecting investments that produce dividend income.
  6. Use Your Tax-Free Savings Accounts (TFSA)Tax-free savings accounts are favourable to non-registered investments because the investment income is non-taxable inside the TFSA. Maximizing the TFSA is a great strategy to reduce OAS clawback, especially if the investment income would put you over the $86,912 threshold. The TFSA is also a great place to hold investments that produce dividend income if those types of investments are preferred.
  7. Consider using leverage. Borrowing to invest can help reduce OAS clawback if the interest on the loan is tax deductible. This interest deductibility reduces your net income dollar-for-dollar. At the end of the loan, you pay the principal on the loan and keep the after-tax investment income.
  8. Avoid capital dispositions after the age of 65. For example, people with rental properties, cottages, or significant unrealized capital gains from investments may be better off triggering those gains before the age of 65. Triggering them after 65 may result in losing OAS from clawback.

For more strategies on Minimizing OAS clawback, check out this post from the Blunt Bean Counter: Tax Planning Strategies to Minimize the Old Age Security Clawback

How the OAS Clawback is treated for a deceased taxpayer.

When an OAS recipient dies, their estate representative must file a final tax return. The OAS clawback is calculated on the final return using the base annual amount.

My two cents

At the end of the day, more people’s concern over Old Age Security (OAS) clawback will not be such a big deal simply because there are not many people over the age of 65 making more than $90,997 of income.

The people that do may have significant pensions or continue to work and earn income over the age of 65. There will also be a group of people that trigger significant capital gains from the sale of second property or investments, but the good news is they will only lose part or all of their OAS in the one year that the capital gains are realized and reported on the tax return. But if you happen to be one of the few that will get affected, make sure you plan ahead accordingly.

Related article: Three Big Changes to OAS