3 Red Flags That Could Trigger An OAS Clawback In 2025

For thousands of Canadian seniors, the Old Age Security (OAS) pension is a vital financial lifeline. But not everyone receives the full amount they expect. That’s because of the OAS Recovery Tax, commonly known as the OAS clawback, which reduces payments when a retiree’s income surpasses the government’s income threshold.

In 2025, the clawback rules remain strict, with income thresholds adjusted to reflect inflation. Any income earned above these limits could mean a partial or even complete reduction in your monthly OAS benefits. Understanding the key red flags that trigger clawbacks is the first step to safeguarding your retirement income.

3 Red Flags That Could Trigger an OAS Clawback

1. High Employment or Pension Income After Retirement

Many Canadians continue working beyond age 65 or receive multiple streams of retirement income. While this strengthens financial security, it can also create clawback risks.

• Extra employment income can push retirees over the threshold.
• Multiple pensions—such as CPP, workplace pensions, or annuity income—add to taxable income.
• Even part-time work can raise your income enough to reduce OAS.

Tip: Carefully balance post-retirement work with your total taxable income to avoid breaching the threshold.

2. Large RRSP or RRIF Withdrawals

By age 71, an RRSP must be converted to a RRIF, and withdrawals become mandatory. These withdrawals are fully taxable and can quickly inflate your annual income.

• Lump-sum withdrawals can immediately place you above the clawback limit for that year.
• Even scheduled RRIF payments, when combined with other income, can trigger clawbacks.

Tip: Consider gradually drawing down RRSP savings earlier in retirement to spread income evenly across multiple years.

3. Capital Gains and Investment Income

Selling investments or properties can create significant taxable income.

• Capital gains: While only 50% of gains are taxable, large sales can spike your income in a single year.
• Dividends and interest: These are fully taxable and can push you over the clawback line.
• Rental income: Profits from real estate also add to net income and affect OAS eligibility.

Tip: Strategically time investment sales across multiple years or explore tax-efficient investments to avoid sudden income jumps.

OAS Clawback Income Thresholds 2025

Age Group	Clawback Begins	Full Clawback At
65–74	$93,454	$151,668
75+	$93,454	$157,490

How the CRA Applies the Clawback

The CRA reviews your previous year’s income to determine if the clawback applies. If your 2024 net income surpasses the $93,454 threshold, your OAS from July 2025 to June 2026 will be reduced. The repayment is automatically deducted from your monthly payments, so there is no way to bypass it once triggered.

Strategies to Minimize or Avoid the OAS Clawback

• Plan RRSP withdrawals early: Taking money out before mandatory RRIF conversion spreads income over more years.
• Leverage TFSAs: Withdrawals from a Tax-Free Savings Account don’t count as taxable income.
• Pension income splitting: Couples can split up to 50% of eligible pension income, reducing overall taxable income.
• Manage capital gains: Spread out sales over several years to avoid income spikes.
• Diversify investments: Favor tax-efficient income sources that don’t heavily impact taxable income.

The OAS clawback is a reality for higher-income seniors in Canada. In 2025, the key red flags to watch out for are employment or pension income after retirement, large RRSP/RRIF withdrawals, and significant capital gains or investment income.

By planning ahead—using strategies like TFSA withdrawals, pension splitting, and staggered investment sales—you can minimize clawback risks and maximize the OAS benefits you’ve earned. Proactive income management is the key to protecting your retirement security.

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