Let’s look at how income affects OAS, plus strategies on how to reduce or avoid OAS clawbacks.
How to calculate OAS clawbacks
If your income is above a certain amount in a given year, you’ll have to repay some or all of your OAS. The recovery threshold changes each year, but the calculation remains the same: You pay back 15% of the difference between your income and the threshold amount for the year.
For example, for income year 2024, the minimum income recovery threshold amount is $90,997. If your total taxable income in 2024 was $120,000, then your repayment would be 15% of $29,003 (the difference between $120,000 and $90,997). That comes out to $4,350.45.
OAS clawbacks are paid off in 12 monthly payments, starting in July of the following tax year (in this case, 2025) and ending the next June (2026, in this example). This July-through-June period is called the “recovery tax period.” Continuing our example: $4,350.45 divided by 12 is $362.54. That’s how much you would repay each month from July 2024 to June 2025.
For income year 2025, the minimum income recovery threshold will be $93,454. For taxpayers aged 65 to 74, the maximum income recovery threshold (above which the full amount of OAS will be clawed back) is $151,668, and for those aged 75 and older, it is $157,490. Learn more about OAS recovery tax thresholds.
How can I avoid OAS clawbacks?
With some planning, it may be possible to reduce or avoid OAS clawbacks. One strategy is splitting pension income with a spouse who has a lower marginal tax rate. Another strategy is to base withdrawals from your registered retirement income fund (RRIF) on the younger spouse’s age—your minimum withdrawals may be lower. Keep in mind that different kinds of investment income are taxed differently, too. (Learn more about how passive income is taxed.) Consider speaking to a financial advisor or tax planner about these and other strategies.
What is the Guaranteed Income Supplement (GIS)?
The Guaranteed Income Supplement (GIS) is a part of the OAS program that provides an additional, non-taxable monthly payment to Canadian residents who receive the OAS and whose previous-year income is below a certain threshold. Like OAS, the GIS is indexed to inflation.
