New Rate for Old Age Security Clawback in 2025: What Seniors Should Expect

Understanding the OAS Clawback: A Quick Overview

What Is the OAS Clawback?

The Old Age Security (OAS) clawback, officially known as the OAS Recovery Tax, is a mechanism where high-income seniors in Canada are required to repay a portion or all of their OAS benefits. This recovery tax ensures that the OAS program remains sustainable by redistributing resources based on income.


Why Does the Government Impose the Clawback?

The clawback is designed to ensure fairness in the distribution of OAS benefits. High-income earners who exceed a set income threshold are subject to this tax, reducing their benefit entitlement. This approach helps direct resources to seniors who rely on OAS for financial support.


Key Factors That Determine OAS Clawback Rates

The OAS clawback is calculated based on a retiree’s net income reported on their tax return. For 2025, the income threshold and recovery rate determine how much of the OAS benefit is subject to recovery. Other factors include additional income sources, such as RRSP withdrawals or investment income.

Changes in the OAS Clawback Rate for 2025

Income Range (CAD) Clawback Rate Impact
Below $93,454 No clawback Full OAS benefits retained
$93,454 - $151,668 15% of income over $93,454 Partial clawback applied
Above $151,668 Full OAS benefit clawed back No OAS benefits received

How Are the 2025 Rates Calculated?

In 2025, the OAS clawback will apply to seniors whose net income exceeds the income threshold, which is indexed annually to inflation. For every dollar above this threshold, 15 cents will be deducted from their OAS benefits.


Comparison of 2024 vs. 2025 OAS Clawback Rates

The income threshold for 2025 is expected to rise slightly compared to 2024, reflecting inflation adjustments. For example, if the 2024 threshold was $86,912, it may increase by a few hundred dollars in 2025. The 15% recovery rate remains unchanged.


Impact of Inflation and Other Economic Factors

Inflation impacts both the income threshold and the purchasing power of retirees. While indexing helps mitigate some effects, rising costs can erode the real value of benefits, leaving seniors to carefully manage their income levels.


Maximum Income Recovery Threshold

The maximum income recovery threshold is the point at which a senior’s OAS benefit is fully clawed back. For 2025, the minimum recovery threshold is projected to be $93,454. The maximum thresholds are expected to be:

  • Ages 65 to 74: $151,668
  • Ages 75 and over: $157,490


These thresholds ensure that seniors with incomes exceeding these amounts will not receive OAS benefits.

Example of  How the Clawback Applies


Let’s assume a senior aged 70 has a net income of $100,000 in 2025. The OAS clawback threshold is $93,454, so their income exceeds the threshold by $6,546. The clawback would be calculated as follows:

  • Excess Income: $100,000 - $93,454 = $6,546
  • Clawback Rate: 15%
  • Total Clawback: $6,546 × 0.15 = $981.90


This means the senior's OAS benefits would be reduced by approximately $981.90 for the period from July 2026 to June 2027.

Who Will Be Most Affected by the New Rates?

Income Thresholds and the Clawback

In 2025, seniors earning above the anticipated threshold (e.g., $93,454) will face reductions in their OAS payments. Those with incomes significantly above the threshold may see their entire OAS benefit clawed back.


Regional Variations in OAS Clawback Effects

While the clawback thresholds are consistent nationwide, the cost of living varies across provinces. Seniors in higher-cost regions like British Columbia or Ontario may feel a greater financial strain despite earning similar incomes to those in lower-cost regions.


Common Scenarios for Seniors in Different Income Brackets

  • Low-income seniors: No impact; benefits remain fully intact.
  • Moderate-income seniors: Partial clawbacks begin if income hovers just above the threshold.
  • High-income seniors: Complete loss of OAS benefits due to significantly exceeding the income threshold.

Strategies to Minimize the OAS Clawback

Tax-Efficient Retirement Income Planning

Structuring your income strategically can help minimize clawbacks. Retirees may reduce taxable income by withdrawing from non-registered investment accounts or using TFSAs.


How RRSPs, RRIFs, and TFSAs Can Help

  • RRSPs and RRIFs: Withdraw strategically to stay below the threshold.
  • TFSAs: Utilize withdrawals, as they are tax-free and do not count toward your net income.


Timing Your Income to Stay Below the Clawback Threshold

Deferring income to lower-income years or splitting pension income with a spouse are effective ways to reduce clawback impacts. Additionally, delaying OAS benefits can increase payments and provide more flexibility.

OAS Clawback FAQs for 2025

  • What Happens If Your Income Fluctuates?

    Seniors with fluctuating incomes may qualify for a reduction in the clawback by requesting a reassessment. For example, if income drops significantly in the following year, seniors can submit a Form T1213 OAS to reduce or eliminate clawback amounts.

  • Are There Any Exemptions or Credits to Offset the Clawback?

    There are no direct exemptions from the clawback. However, seniors can explore tax credits, such as the Age Credit or Pension Income Credit, to reduce their overall tax burden.

  • How to Appeal a Clawback Assessment

    If you believe the clawback has been incorrectly applied, contact the Canada Revenue Agency (CRA) to review your assessment. Having proper documentation, such as income verification, is essential.

Expert Tips and Tools for Retirees

Useful Online Calculators for Clawback Planning

Several online tools, including those provided by financial institutions and retirement planning websites, allow seniors to estimate their OAS clawback based on projected income.

When to Consult a Financial Advisor

For seniors with complex financial situations, consulting a financial advisor can help optimize income strategies, ensuring minimal clawback impacts.


Staying Informed About OAS Clawback Updates

Regularly reviewing updates from trusted sources, such as the www.beretiredready.com website or reputable financial advisors, ensures retirees are aware of policy changes affecting their OAS benefits.

Final Thoughts: Preparing for the OAS Clawback in 2025

Seniors should proactively plan their finances to manage the OAS clawback effectively. By understanding the rules, staying below income thresholds, and leveraging tax-efficient strategies, retirees can maximize their benefits and ensure a secure financial future.

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