Key Takeaways
- 1.The 2025 OAS recovery tax threshold is $90,997. Every dollar of net income above this triggers a 15-cent clawback from your OAS benefit — applied automatically when you file your tax return.
- 2.At $95,000 net income, the overage is $4,003. The exact clawback is $600.45 per year — reducing the maximum OAS benefit from $8,756 to approximately $8,156.
- 3.Ontario retirees face a compounding surtax effect in this income band. The effective marginal rate including OAS clawback reaches approximately 48.89% — higher than in provinces without a surtax.
- 4.TFSA withdrawals do not count as net income. Shifting $4,003 of spending from RRIF to TFSA eliminates the clawback entirely and saves $600.45.
- 5.Pension income splitting with a lower-income spouse can shift up to 50% of eligible pension income off your return, potentially dropping net income below the threshold.
The Scenario: Ontario Retiree, $95,000 Net Income From Three Sources
This worked example models a common retirement income profile in Ontario: a retiree drawing from multiple sources that individually seem modest but collectively push net income above the OAS clawback threshold.
- CPP retirement benefit: $16,375/year (near-maximum)
- Defined benefit pension: $52,000/year
- RRIF withdrawal: $26,625/year
- Total net income (line 23600): $95,000
- OAS recovery threshold (2025): $90,997
- Amount over threshold: $4,003
- Province: Ontario
- Age: 72 (receiving OAS and RRIF minimum withdrawals)
How the OAS Clawback Works: 15 Cents per Dollar
The OAS recovery tax is straightforward but unforgiving. If your net income on line 23600 of your T1 tax return exceeds the threshold, you repay 15% of the excess. This is not a marginal tax rate that applies only to a bracket — it is a dollar-for-dollar reduction of your OAS benefit, applied on top of your regular income tax.
OAS Clawback Calculation at $95,000:
Net income: $95,000
Recovery threshold: $90,997
Excess: $95,000 − $90,997 = $4,003
Recovery tax: $4,003 × 15% = $600.45
Maximum annual OAS (2025): $8,756
OAS after clawback: $8,756 − $600.45 = $8,155.55
You lose $600.45 of your annual OAS benefit.
The recovery tax is applied in the July-to-June payment cycle following your tax filing. If your 2024 tax return (filed in early 2025) shows net income of $95,000, the $600.45 clawback is deducted from your OAS payments between July 2025 and June 2026 — approximately $50.04 less per monthly OAS payment.
Breakeven Table: Net OAS at Different Income Levels
The clawback scales linearly. Here is what an Ontario retiree keeps at four income levels, assuming the maximum OAS benefit of $8,756:
| Net Income | Amount Over Threshold | Clawback (15%) | Net OAS Received | OAS Lost |
|---|---|---|---|---|
| $90,000 | $0 | $0 | $8,756 | $0 |
| $95,000 | $4,003 | $600.45 | $8,155.55 | $600.45 |
| $100,000 | $9,003 | $1,350.45 | $7,405.55 | $1,350.45 |
| $110,000 | $19,003 | $2,850.45 | $5,905.55 | $2,850.45 |
| $149,370+ | $58,373+ | $8,756+ | $0 | $8,756 (full) |
OAS is fully clawed back at approximately $149,370 net income, where the 15% recovery tax on the $58,373 overage equals the full $8,756 annual benefit. For a BC retiree facing the same calculation at a higher income, see our OAS clawback calculator for BC at $110K.
The Ontario Surtax Problem: Why Clawback Hurts More Here
No top-ranking page for this query mentions the compounding effect of Ontario's provincial surtax in the OAS clawback zone — but it meaningfully raises the effective marginal rate for Ontario retirees between $90,000 and $110,000 net income.
Ontario levies a surtax of 20% on provincial income tax exceeding $4,991, plus 36% on provincial tax exceeding $6,387. At $95,000 net income, an Ontario retiree is squarely in both surtax tiers. Combined with the OAS clawback, here is what the effective marginal rate looks like:
Effective Marginal Rate at $95,000 (Ontario Retiree):
Federal marginal rate: 20.5%
Ontario marginal rate: 9.15%
Ontario surtax effect: ~4.24%
Combined income tax rate: ~33.89%
OAS recovery tax: +15.0%
Effective marginal rate on next dollar: ~48.89%
Compare this to an Alberta retiree at the same income: with a flat 10% provincial rate and no surtax, the effective marginal rate including OAS clawback would be approximately 45.5%. The Ontario retiree pays roughly 3.4 percentage points more on every dollar in this band — a hidden penalty that makes clawback avoidance especially valuable in Ontario. For a side-by-side of Ontario versus Alberta tax rates, see our Alberta vs Ontario income tax comparison.
Strategy 1: Replace Taxable Income With TFSA Withdrawals
TFSA withdrawals are not reported as income on your tax return. They do not appear on line 23600 and have zero effect on the OAS recovery tax. This makes the TFSA the single most important tool for managing the clawback.
TFSA Strategy for This Retiree:
Current RRIF withdrawal: $26,625
Amount to shift to TFSA: $4,003
New RRIF withdrawal: $22,622
TFSA withdrawal: $4,003
New net income: $95,000 − $4,003 = $90,997
OAS clawback: $0
Annual savings: $600.45 in preserved OAS
Plus: ~$135 in saved income tax on the $4,003
The TFSA Planning Window
This strategy requires having sufficient TFSA savings before retirement. The cumulative TFSA contribution room for someone who was 18+ and a Canadian resident since 2009 is $95,000 as of 2024. If your TFSA is underfunded, the time to start building it is before you retire — ideally by redirecting non-registered savings into the TFSA in the years leading up to age 65. Every dollar in the TFSA at retirement is a dollar you can draw without triggering clawback.
Strategy 2: Split Pension Income With a Lower-Income Spouse
If your spouse or common-law partner has lower net income, you can allocate up to 50% of eligible pension income to their return using Form T1032. This directly reduces your net income on line 23600.
For this retiree, two of the three income sources are eligible for splitting:
| Income Source | Annual Amount | Eligible for Splitting? | Max Splittable (50%) |
|---|---|---|---|
| CPP retirement benefit | $16,375 | No* | $0 |
| DB pension | $52,000 | Yes | $26,000 |
| RRIF withdrawal | $26,625 | Yes (age 65+) | $13,313 |
| Total splittable | $78,625 | — | $39,313 |
*CPP has its own sharing mechanism (CPP pension sharing) which is separate from pension income splitting. You must apply to Service Canada, and both spouses must be at least 60. The amount shared depends on the period of cohabitation.
This retiree only needs to split $4,003 of pension income to eliminate the clawback entirely. Even a modest split of 5% of the DB pension ($2,600) plus a small RRIF reduction would do it. With $39,313 in total splittable income, there is enormous room to optimize.
Pension Splitting to Eliminate Clawback:
Amount to split: $4,003 (minimum needed)
Source: DB pension ($52,000 × 7.7% = $4,003)
Your new net income: $95,000 − $4,003 = $90,997
Spouse receives additional: $4,003
OAS clawback: $0
Both spouses must file Form T1032 with their tax returns.
Strategy 3: Minimize RRIF Withdrawals to the Required Minimum
Once you convert your RRSP to a RRIF (mandatory by December 31 of the year you turn 71), you must withdraw a minimum percentage each year based on your age. But many retirees withdraw more than the minimum — either out of habit, because their advisor suggested it, or because they assumed they needed the cash flow. Every dollar withdrawn above the minimum increases net income and pushes toward the clawback.
| Age | RRIF Min % | Min Withdrawal on $400K | Net Income (CPP + DB + RRIF Min) |
|---|---|---|---|
| 72 | 5.40% | $21,600 | $89,975 |
| 72 (current withdrawal) | — | $26,625 | $95,000 |
| 75 | 5.82% | $23,280 | $91,655 |
| 80 | 6.82% | $27,280 | $95,655 |
Based on a $400,000 RRIF balance. The minimum percentage increases each year, meaning this strategy becomes less effective as you age and the balance grows relative to the threshold. For detailed RRIF minimum schedules, see our RRIF minimum withdrawal calculator for Ontario.
At age 72 with a $400,000 RRIF, the minimum withdrawal is $21,600. This retiree is withdrawing $26,625 — a full $5,025 above the minimum. Reducing to the minimum alone would drop net income to $89,975, which is below the $90,997 threshold. The clawback disappears entirely, and the extra $5,025 stays invested in the RRIF, continuing to grow tax-deferred.
Why RRSP Contributions After 71 Are Not an Option
A common question from retirees: “Can I contribute to an RRSP to bring my net income below the threshold?” For most retirees over 71, the answer is no.
You cannot hold an RRSP past December 31 of the year you turn 71. After that date, the only way to claim an RRSP deduction is through a spousal RRSP — and only if your spouse is under 72 and you have earned income generating new RRSP contribution room. Since most retirees over 71 have no employment or self-employment income, they have no new RRSP room. This makes RRSP contributions a theoretical option that is practically unavailable to the majority of retirees in the clawback zone.
Combining Strategies: The Optimal Approach
These three strategies are not mutually exclusive. A retiree with all three levers available can combine them for maximum effect:
| Strategy | Net Income Reduction | Resulting Net Income | OAS Clawback |
|---|---|---|---|
| No strategy (status quo) | $0 | $95,000 | $600.45 |
| TFSA only ($4,003 shift) | −$4,003 | $90,997 | $0 |
| Pension splitting only ($4,003) | −$4,003 | $90,997 | $0 |
| RRIF min only ($5,025 reduction) | −$5,025 | $89,975 | $0 |
| All three combined | −$13,031 | $81,969 | $0 |
For retirees well above the threshold, combining all three strategies creates a larger buffer. At $81,969 net income, you have nearly $9,000 of headroom before the clawback triggers — helpful if income fluctuates year to year due to capital gains or other one-time events.
Ontario-Specific Scenario: Retired Teacher With DB Pension + Max CPP
A retired Ontario teacher receiving a $62,000 defined benefit pension from OTPP plus the near-maximum CPP of $16,375 has a combined income of $78,375 before any RRIF withdrawals. They are $12,622 below the threshold. This means they can withdraw up to $12,622 from their RRIF without triggering any OAS clawback.
But if the same teacher also receives the maximum OAS ($8,756), their total gross income is $87,131 — still below the threshold. The OAS itself is included in net income but does not typically push someone over the threshold on its own at this level. The risk comes from additional sources: a part-time consulting gig, a one-time capital gain from selling investments, or RRIF withdrawals above the minimum. For detail on how CPP timing affects this calculation, see our CPP at 60 vs 65 vs 70 breakeven calculator.
Self-Employed Professional: RRSP Drawdown Pushing Above Threshold
A second scenario: a self-employed professional who retired at 65 with a large RRSP (now RRIF) and no defined benefit pension. Their income profile looks different:
- CPP: $12,000/year (less than maximum due to self-employed contribution gaps)
- RRIF withdrawal: $45,000/year from a $750,000 balance
- Non-registered investment income: $8,000/year
- OAS: $8,756/year
- Total net income: $73,756 — below the threshold
This retiree is safe — until a one-time event pushes them over. Selling a non-registered investment with a $40,000 capital gain adds $26,680 to net income (at the 66.7% inclusion rate for gains above the $250,000 annual threshold, or $20,000 at the 50% inclusion rate for gains below it). That single transaction could push net income above $90,997 and trigger clawback for the following year. The lesson: manage capital gains timing carefully, and consider realizing gains in years when other income is lower. For more on the RRSP meltdown approach, see our RRSP meltdown strategy calculator.
Important Disclaimer
This article provides general information about the Old Age Security recovery tax as it applies to Ontario retirees. It is not financial, tax, or legal advice. The OAS program is administered by Service Canada and the recovery tax is calculated by the CRA based on your net income as reported on your T1 tax return. The $90,997 threshold applies to the 2024 tax year and is indexed annually — the threshold for the 2025 tax year may be different. Ontario surtax calculations are approximate and depend on your full tax profile including credits and deductions. RRIF minimum percentages are prescribed by regulation and the figures used here are for illustrative purposes. Pension income splitting rules are governed by section 60.03 of the Income Tax Act and require both spouses to file Form T1032. Consult a qualified financial advisor or tax professional for advice specific to your circumstances.