Understanding the OAS Clawback Thresholds for 2025
The Old Age Security (OAS) pension is a cornerstone of Canada's retirement income system, funded through general tax revenues rather than individual contributions. Unlike the Canada Pension Plan (CPP), eligibility for OAS depends on your age and how long you have lived in Canada, not your employment history. However, for higher-income earners, the benefit is subject to a clawback, or pension recovery tax. This means that the amount you receive can be reduced or eliminated based on your annual net income. The income thresholds that determine the OAS clawback are updated annually to account for inflation and economic factors.
For the period from July 2025 to June 2026, the clawback will be based on your net income from the 2024 tax year. The OAS clawback threshold is the income level at which the recovery tax begins.
How the OAS Clawback is Calculated
When your income exceeds the minimum recovery threshold, your OAS pension is reduced by 15 cents for every dollar of net income above that threshold. This continues until your income reaches the maximum threshold, at which point the entire OAS benefit is recovered. The calculation uses your net income (line 23400 on your tax return) before adjustments.
For example, if a 68-year-old Canadian retiree had a net income of $100,000 in 2024, their OAS clawback would be calculated as follows for the July 2025 to June 2026 payment period:
- Excess Income: $100,000 (net income) - $90,997 (2024 minimum threshold) = $9,003.
- Clawback Amount: $9,003 x 15% = $1,350.45.
- Annual OAS Reduction: The retiree's OAS benefits would be reduced by $1,350.45 during the July 2025 to June 2026 payment period.
This amount is typically deducted directly from your monthly OAS payments.
OAS Clawback Thresholds: 2025 vs. 2024
The income thresholds that trigger the OAS recovery tax are adjusted each year. Here is a comparison of the minimum and maximum income thresholds for the 2025 (based on 2024 income) and 2024 (based on 2023 income) tax years.
| Threshold Type | Recovery Tax Period | Income Year | Minimum Income Threshold | Maximum Income Threshold (Age 65-74) | Maximum Income Threshold (Age 75+) |
|---|---|---|---|---|---|
| Current | July 2025 to June 2026 | 2024 | $90,997 | $148,451 | $154,196 |
| Upcoming | July 2026 to June 2027 | 2025 | $93,454 | $151,668 | $157,490 |
Strategies for Managing the OAS Clawback
For Canadians concerned about the OAS clawback, several financial planning strategies can help to manage or minimize its impact.
- Delaying Your OAS: You can defer receiving your OAS for up to five years, until age 70. This increases your monthly pension by 0.6% for each month of deferral, potentially providing a higher benefit in years where your income is lower.
- Strategic RRSP/RRIF Withdrawals: Since Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF) withdrawals are included in your net income, you can plan withdrawals to keep your income below the clawback threshold. For example, making larger RRSP withdrawals in years before you start receiving OAS can reduce future RRIF minimums and prevent the clawback.
- Utilizing a TFSA: Withdrawals from a Tax-Free Savings Account (TFSA) do not count toward your net income and therefore do not trigger the OAS clawback. Shifting dividend-earning investments into a TFSA can be an effective way to generate tax-free income in retirement.
- Deferring CPP Payments: Delaying your Canada Pension Plan (CPP) payments until age 70 can also help manage your taxable income and increase your monthly CPP amount. This strategy should be evaluated based on your overall financial and health situation.
Additional Income-Tested Benefits
Beyond the basic OAS pension, low-income seniors may also be eligible for the Guaranteed Income Supplement (GIS). The GIS is a non-taxable benefit and has its own set of income thresholds. For example, a single, widowed, or divorced individual in the July to September 2025 period must have an annual net income of less than $22,272 to qualify for the GIS. There are different thresholds for couples, depending on their respective OAS and Allowance status.
Conclusion
The maximum income to qualify for OAS in Canada is not a simple cutoff, but a series of thresholds that trigger a partial or full clawback of the benefit. For 2025, a retiree's 2024 net income will determine the repayment amount, with minimum thresholds starting at $90,997. The maximum income before the benefit is fully eliminated is approximately $148,451 for those aged 65–74 and $154,196 for those 75 and over, based on 2024 income. By understanding how the recovery tax works and implementing strategic planning, Canadians can effectively manage their retirement income and maximize their benefits. For personalized advice, retirees should consult a financial advisor and review official resources from the Government of Canada.
