OAS Clawback Explained: How to Avoid Losing Your Old Age Security in 2025

Old Age Security (OAS) is meant to be a universal pension for Canadian seniors — but it is not unconditional. If your retirement income climbs high enough, the government claws part of it back through what is officially called the OAS Recovery Tax, and informally known as the “OAS clawback.”

For retirees with a paid-off mortgage, a defined-benefit pension, and RRSP withdrawals stacking up, this threshold can arrive faster than expected.

How the Clawback Formula Works

For the 2025 income year, the recovery tax kicks in once your net income exceeds $93,454. Above that line, you repay 15% of every dollar of income above the threshold, up to a maximum income level where OAS is reduced to zero.

Worked Example

Suppose a retiree has net income of $105,000 in 2025, made up of a company pension, RRIF withdrawals, and CPP:

• Income above threshold: $105,000 − $93,454 = $11,546
• Repayment: $11,546 × 15% = $1,731.90

That $1,731.90 is deducted directly from OAS payments over the following benefit year (July to June), typically spread across monthly payments rather than taken as one lump sum.

2025 Clawback Reference Table

Full OAS is clawed back entirely once net income reaches roughly $151,668 for recipients aged 65–74 (the figure is slightly higher for those 75+, who receive a higher base OAS amount).

What Counts as “Net Income” for the Clawback

The threshold test uses your net income — essentially line 23600 of your T1 return — not your gross earnings. Almost every common retirement income source counts toward it:

• Counts: employment income, company pension payments, CPP/QPP benefits, RRSP and RRIF withdrawals, interest, dividends, rental income, and taxable capital gains.
• Does not count: TFSA withdrawals, tax-free gifts, and the principal of non-registered savings you simply move between accounts. (See our RRSP vs TFSA guide for how the two accounts are taxed differently.)

This distinction is why two retirees with the same spending can face very different clawbacks: the one funding lifestyle from a TFSA shows far less “income” than the one drawing the same dollars from a RRIF. Note that the OAS repayment itself is backed out of the net-income figure used for the test, so there is no circular calculation — you are not penalized twice on the same dollar.

How the Repayment Actually Happens

You do not write a separate cheque to Service Canada. The repayment is calculated on your tax return for the income year, and then recovered by reducing your monthly OAS payments over the following benefit year (July to June). Using the example above, the $1,731.90 repayment would shave roughly $144 off each monthly OAS cheque from July 2026 through June 2027.

There is a one-year lag built into the system: your 2025 income determines the recovery applied from July 2026 to June 2027. If your income drops sharply — say you retire mid-year — you can file CRA form T1213(OAS), “Request to Reduce Old Age Security Recovery Tax at Source,” with your estimated current-year income, rather than waiting a full year for the reduction to correct itself at tax-filing time.

The Hidden Cost: Your Real Marginal Rate in the Clawback Zone

Here is the part most retirement calculators miss. While your income sits between $93,454 and the full-clawback point, every extra dollar you earn costs you 15 cents of OAS on top of ordinary income tax. In Ontario in 2025, for example, the combined federal-provincial marginal rate on income between $114,750 and $151,668 is 37.16% (26% federal + 11.16% provincial) — so your true marginal cost on the next dollar inside the clawback zone is roughly 52.16%. You keep barely 48 cents.

This stacking effect is what makes the strategies below worth real money. Shifting $10,000 of income out of the clawback zone does not just save $1,500 of OAS — it also avoids income tax on that $10,000 at your top marginal rate.

Should You Even Bother Taking OAS If You'll Be Clawed Back?

Yes — apply anyway. The clawback only ever takes back 15 cents per dollar above the threshold, so you always keep at least 85 cents of each OAS dollar before income tax. There is no income level where taking OAS leaves you worse off than not taking it; the worst case is simply that the net benefit shrinks toward zero as income approaches the full-clawback point. The one exception is timing: if a single unusually high-income year (a large RRSP withdrawal, a property sale) would wipe out a year of OAS, deferring OAS to age 70 can shift those payments into calmer years.

Deferring OAS: The Math

Deferring OAS past 65 increases the monthly payment by 0.6% per month of delay — up to 36% more at age 70. On the maximum 2025 OAS of roughly $8,732 per year at 65, deferring to 70 lifts it to about $11,876 per year, every year, indexed to inflation for life. The trade-off is five years of forgone payments (about $43,660), which takes roughly 13–14 years of the higher payments to recover — a reasonable bet if you expect to live past 84 and want to dodge the clawback during high-earning early-retirement years. If you expect lower income after 70, the deferral both raises the payment and lands it in years where the clawback no longer bites. Run the numbers for your own timeline with our retirement savings guide.

Strategies to Reduce the Clawback

• Prioritize TFSA withdrawals. Money withdrawn from a TFSA is not counted as income anywhere, so it never touches the clawback calculation — unlike RRSP/RRIF withdrawals.
• Split eligible pension income with a spouse. Canada allows retirees to allocate up to 50% of eligible pension income to a lower-income spouse, which can pull your individual net income back under the threshold.
• Smooth out RRSP/RRIF withdrawals. Large one-time withdrawals can push a single year's income well past the threshold. Spreading withdrawals across more years, starting earlier if needed, keeps each year's income lower.
• Consider deferring OAS. Deferring OAS past age 65 (up to age 70) increases your monthly payment by 0.6% per month deferred, and reduces the number of years your OAS is exposed to a potential clawback if you expect high income only in early retirement.