Key Takeaways
- 1.On $110,000 net income, you exceed the $90,997 OAS clawback threshold by $19,003. The recovery tax is 15% × $19,003 = $2,850.
- 2.Of your $8,756 annual OAS, you keep $5,906 ($492/month) after the clawback. CRA withholds approximately $238/month from your OAS payments.
- 3.A $19,003 RRSP contribution would bring your net income to exactly $90,997 and eliminate the entire clawback — saving $2,850 in recovery tax plus generating approximately $4,750 in income tax savings.
- 4.Charitable donations provide tax credits but do not reduce line 23500 net income — they will not reduce your OAS clawback.
- 5.Pension income splitting with a lower-income spouse can shift up to 50% of eligible pension income off your return, potentially dropping you below the $90,997 threshold.
The OAS Recovery Tax: 15 Cents per Dollar Above $90,997
The OAS clawback — formally called the “OAS recovery tax” — is a mechanism that reduces or eliminates OAS payments for higher-income retirees. It applies when your net income on line 23500 of your T1 tax return exceeds the minimum recovery threshold, which for the July 2025 to June 2026 payment period is $90,997.
For every dollar of net income above $90,997, you repay 15 cents of your OAS benefit. The clawback continues until your entire OAS is eliminated, which for the maximum benefit of $8,756/year occurs at approximately $149,370 of net income.
Your OAS clawback calculation:
Net income (line 23500): $110,000
OAS clawback threshold (2025): $90,997
Income above threshold: $110,000 − $90,997 = $19,003
Recovery tax: 15% × $19,003 = $2,850.45
Annual OAS benefit: $8,756
OAS after clawback: $8,756 − $2,850 = $5,906/year
Monthly OAS after clawback: $492/month
Monthly withholding by CRA: $238/month
You are losing approximately one-third of your OAS benefit to the recovery tax. At $110,000 you are in the lower half of the clawback range — well above the threshold but nowhere near full elimination. This means income-reduction strategies can meaningfully recover some or all of the $2,850. For context on how CPP timing interacts with OAS clawback at different income levels, see our CPP early vs. late start breakeven calculator.
Line 23500 Net Income: What Counts Toward the Clawback
The OAS clawback is calculated on your net income at line 23500 — not your gross income, and not your taxable income. For a BC retiree at $110,000, that total likely comes from several sources. Understanding exactly what feeds into line 23500 is critical because some income types are frequently underestimated.
| Income Source | Included in Line 23500? | Notes |
|---|---|---|
| CPP retirement pension | Yes, fully | Included at full amount received |
| Workplace pension | Yes, fully | Defined benefit or defined contribution payouts |
| RRSP/RRIF withdrawals | Yes, fully | Including mandatory RRIF minimum withdrawals |
| Rental income | Yes, net of expenses | Revenue minus deductible expenses (CCA, repairs, interest) |
| Capital gains | Yes, at 50% inclusion | Only the taxable portion (50% of gain) enters net income |
| Eligible dividends | Yes, grossed up by 38% | The gross-up inflates net income above actual cash received |
| Interest income | Yes, fully | GICs, savings accounts, bonds |
| TFSA withdrawals | No | TFSA income is completely invisible to CRA for OAS purposes |
| OAS payments | No | OAS itself is excluded from the clawback calculation |
Two items catch retirees off guard. First, eligible dividend gross-up: if you receive $10,000 in eligible dividends, your line 23500 shows $13,800 due to the 38% gross-up — pushing you further into the clawback zone than the actual cash received. Second, mandatory RRIF minimums after age 71: even if you do not need the money, the forced withdrawal adds to line 23500 every year. For strategies to manage RRIF withdrawals before they trigger clawback, see our RRSP meltdown strategy calculator.
Strategy 1: RRSP Contribution to Eliminate the Clawback
RRSP contributions directly reduce your net income on line 23500. If you have available contribution room, this is the most straightforward way to reduce or eliminate OAS clawback.
Scenario: RRSP contribution to eliminate clawback
Current net income: $110,000
Target net income: $90,997 (clawback threshold)
Required RRSP contribution: $110,000 − $90,997 = $19,003
OAS clawback eliminated: $2,850 saved
Income tax savings (approx. 28.2% marginal rate): ~$5,359
Total tax benefit of $19,003 contribution: ~$8,209
Effective return on the RRSP contribution: 43.2%
The combined benefit is dramatic: the RRSP contribution saves you $2,850 in OAS recovery tax plus approximately $5,359 in federal and BC provincial income tax at the 28.2% combined marginal rate (for income between ~$57,375 and ~$106,717). The effective return of 43.2% on that $19,003 contribution is one of the highest risk-free returns available in Canadian tax planning.
The catch: you cannot contribute to your own RRSP after December 31 of the year you turn 71. If you are past that age, you can still contribute to a spousal RRSP (assuming your spouse is 71 or younger) and claim the deduction on your own return. You also need available RRSP contribution room — check your most recent Notice of Assessment or CRA My Account.
Why Charitable Donations Do Not Reduce OAS Clawback
This is one of the most common misconceptions in Canadian retirement tax planning. Charitable donations provide a non-refundable tax credit on Schedule 9 of your T1 return, but they do not reduce your net income on line 23500. Because OAS clawback is calculated on line 23500, a $19,003 charitable donation would save you significant income tax (approximately $5,500 in federal and provincial tax credits) but would do absolutely nothing to reduce the $2,850 OAS recovery tax.
$19,003 RRSP contribution:
Reduces line 23500: Yes — net income drops to $90,997
OAS clawback reduction: $2,850 eliminated
Income tax savings: ~$5,359
Total benefit: ~$8,209
$19,003 charitable donation:
Reduces line 23500: No — net income stays at $110,000
OAS clawback reduction: $0
Tax credit: ~$5,500 (first $200 at 15%+5.06%, remainder at 33%+16.8%)
Total benefit: ~$5,500
If you want to donate and reduce your OAS clawback, the optimal sequence is: make an RRSP contribution first to eliminate the clawback, then donate from other funds to claim the tax credit. The two benefits stack, but only the RRSP contribution actually moves the clawback needle.
Strategy 2: Spousal Income Splitting to Drop Below $90,997
If you are 65 or older with a spouse or common-law partner, you can allocate up to 50% of eligible pension income to your spouse on your tax returns using Form T1032. Eligible pension income includes RRIF withdrawals, life annuity payments from a registered pension plan, and certain workplace pension payouts. CPP and OAS are not eligible for this form of splitting.
Scenario: Pension income splitting
Your income breakdown:
CPP pension: $14,000
Workplace pension: $40,000
RRIF withdrawals: $30,000
Other investment income: $26,000
Total net income: $110,000
Eligible for splitting: $40,000 + $30,000 = $70,000
Maximum split (50%): $35,000 to spouse
Your net income after split: $110,000 − $35,000 = $75,000
OAS clawback: $0 (below $90,997 threshold)
OAS recovery tax saved: $2,850
In this example, the pension income split alone is more than sufficient to eliminate the clawback entirely — dropping net income from $110,000 to $75,000. The split amount gets added to your spouse's return, so this works best when your spouse has lower income and is in a lower tax bracket. If both spouses are near the $90,997 threshold, splitting could push the other spouse into clawback territory. For more on how spousal strategies work with RRSP accounts, see our spousal RRSP calculator for common-law couples.
Deferring OAS to Age 70: Avoiding Clawback During High-Income Years
You can defer OAS from age 65 to age 70, and for each month of deferral your benefit increases by 0.6% — up to 36% at age 70. If you expect your income to remain above $90,997 during your mid-60s but drop later (for example, once you stop working or drawing down RRSP), deferral lets you avoid the clawback entirely during those high-income years.
| OAS Start Age | Monthly Benefit | Annual Benefit | Enhancement |
|---|---|---|---|
| 65 | $730 | $8,756 | 0% |
| 66 | $782 | $9,387 | 7.2% |
| 67 | $835 | $10,017 | 14.4% |
| 68 | $888 | $10,648 | 21.6% |
| 69 | $940 | $11,278 | 28.8% |
| 70 | $992 | $11,908 | 36.0% |
Amounts based on the 2025 maximum OAS of $8,756/year. The enhanced benefit is indexed to inflation after it begins.
The deferral calculation is not purely about avoiding clawback. If you defer from 65 to 70, you forgo 5 years of payments ($8,756 × 5 = $43,780 before clawback, or $29,530 after the $2,850 annual clawback at $110,000 income). The enhanced benefit of $11,908/year needs approximately 14 years to break even against the base benefit — meaning you break even around age 84. If your income drops below $90,997 at some point after 65, the clawback-adjusted breakeven is more favourable to starting at 65. For a parallel analysis on CPP deferral math, see our CPP early vs. late start breakeven calculator.
Recovery Tax on Your T1 vs. Monthly CRA Withholding
There are two mechanisms through which the OAS clawback is applied, and understanding the difference avoids surprises.
T1 recovery tax (annual): When you file your tax return, you calculate the OAS recovery tax on the T1-OAS worksheet. This is the definitive amount based on your actual net income for the year. If you owe more than what was withheld from your monthly OAS payments, you pay the difference with your tax return. If too much was withheld, you receive a refund.
Monthly withholding (estimated): Based on your previous year's tax return, CRA estimates your clawback for the next payment period (July to June) and deducts it from your monthly OAS cheque. For a retiree whose 2024 net income was $110,000, CRA would withhold approximately $238/month starting in July 2025.
Monthly withholding calculation:
Estimated annual clawback: $2,850
Monthly withholding: $2,850 ÷ 12 = $237.54/month
Your monthly OAS payment:
Gross OAS: $729.67/month
Less withholding: −$237.54
Net OAS deposited: $492.13/month
If your income fluctuates significantly year-to-year — for example, you sell a property one year with a large capital gain — the monthly withholding based on that high-income year will continue for the following payment period even if your income returns to normal. You can request CRA adjust your withholding by filing Form T1213(OAS) if you believe the estimate is too high.
The TFSA Alternative: Invisible Income for OAS Purposes
TFSA withdrawals do not appear on line 23500 and are completely invisible to CRA for OAS clawback purposes. For a BC retiree with $110,000 net income, restructuring future savings into a TFSA instead of an RRSP means the eventual withdrawals will not trigger clawback — unlike RRIF minimums that force taxable income onto your return every year after age 71. For a detailed comparison of which account saves more tax overall, see our RRSP vs. TFSA comparison calculator.
The optimal strategy for many retirees is to hold enough in RRSP/RRIF to fill up to the $90,997 threshold with mandatory withdrawals and other income, then hold additional retirement savings in a TFSA where they generate no net income for clawback purposes. This is a long-term planning decision best made years before retirement. For a broader view of how retirement savings targets work in Canada, see our Canadian retirement needs calculator.
Sensitivity Table: OAS Clawback at Different Income Levels
How much of the $8,756 annual OAS benefit do you keep at various net income levels? This table shows the clawback amount and remaining OAS for BC retirees at several income points.
| Net Income | Above Threshold | Recovery Tax | OAS Kept | OAS Kept/Month |
|---|---|---|---|---|
| $90,997 | $0 | $0 | $8,756 | $730 |
| $95,000 | $4,003 | $600 | $8,156 | $680 |
| $100,000 | $9,003 | $1,350 | $7,406 | $617 |
| $110,000 | $19,003 | $2,850 | $5,906 | $492 |
| $120,000 | $29,003 | $4,350 | $4,406 | $367 |
| $140,000 | $49,003 | $7,350 | $1,406 | $117 |
| $149,370+ | $58,373+ | $8,756+ | $0 | $0 |
Based on 2025 OAS maximum of $8,756/year and clawback threshold of $90,997. Your highlighted row shows $110,000 net income.
Important Disclaimer
This article provides general information about the OAS recovery tax based on 2025 thresholds and rates. Your actual OAS benefit depends on years of Canadian residence after age 18, and the clawback threshold is adjusted annually by CRA. BC provincial tax rates and brackets are subject to legislative changes. RRSP contribution room depends on your individual earned-income history. Pension income splitting eligibility depends on the type of pension income and your marital status. This is not financial, tax, or retirement planning advice. Consult a qualified financial planner or contact Service Canada for guidance specific to your situation.