OAS Clawback Red Flags 2025 – 3 Main Reasons Why CRA May Cut Your Old Age Security Payments

Old Age Security (OAS) is one of the most important retirement benefits for Canadians over the age of 65. Every month, it helps seniors cover basic living expenses.

However, many retirees are shocked when they notice that their OAS payments are suddenly reduced or even stopped. This happens because of the OAS Clawback, also called the OAS Recovery Tax.

The Canada Revenue Agency (CRA) reduces or cancels payments if a senior’s yearly income is higher than the set limit. In 2025, it is more important than ever for seniors to understand these rules so that they can plan their retirement income wisely and avoid unpleasant surprises.

In this article, we explain what the OAS Clawback is, the 3 major red flags that can trigger it, and practical steps seniors can take to reduce or avoid losing their payments.

What Is the OAS Clawback?

The OAS Clawback is a rule where seniors with higher income must repay part or all of their OAS benefits. For the period July 2025 to June 2026, the CRA has set the income threshold at $93,454.

• If your net income is above $93,454, you must repay 15 cents for every extra dollar.
• If your income is around $151,668 or more, your entire OAS payment may be cut off.

This system ensures that seniors with higher income contribute back, while lower and middle-income retirees continue to receive full OAS benefits.

OAS Clawback Income Threshold 2025

Year (Payment Period)	Minimum Income Threshold	Full OAS Lost At	Repayment Rate
July 2025 – June 2026	$93,454	$151,668	15% above threshold

1. High Net Income from Pensions or Investments

The most common reason for an OAS clawback is high taxable income. Seniors who earn money from multiple sources may cross the threshold without realizing it. Common income sources include:

• Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) payments
• Company pensions
• Registered Retirement Income Fund (RRIF) withdrawals
• Dividends and capital gains from investments

If your combined income from these sources goes above the $93,454 threshold, the CRA will automatically reduce your OAS payments.

Tip: To reduce this risk, consider income splitting with a spouse or withdrawing smaller amounts from RRSPs/RRIFs gradually. This keeps your income under the clawback line.

2. Selling Property or Large One-Time Income

A second red flag is when seniors make a big one-time transaction that raises their taxable income. Even if it is just for one year, it can still trigger a clawback for the next OAS cycle.

Examples include:

• Selling a rental property with large capital gains
• Withdrawing a big sum from an RRSP or RRIF
• Inheriting taxable assets

Although these events may be one-time gains, the CRA still counts them as income for that year. That means your OAS could be reduced or even stopped in the following year.

3. Not Planning for Income Reporting Rules

The third common mistake is failing to plan around CRA income reporting rules. Many retirees are not fully aware of what counts toward net income.

• Guaranteed Income Supplement (GIS) is tax-free and does not affect clawback.
• But deductions and credits like medical expenses, charitable donations, or pension income splitting can lower taxable income.
• If you fail to use these deductions, your income may appear higher than it really is—leading to unnecessary clawbacks.

Proper tax planning can make a big difference in keeping your OAS safe.

How to Avoid or Reduce the OAS Clawback

Here are some practical steps seniors can take to protect their payments:

• Delay OAS until age 70 – This increases the monthly benefit and may reduce clawback if you expect lower income later.
• Use income splitting – Share up to 50% of pension income with a lower-earning spouse.
• Withdraw RRSP early – Taking money out of RRSPs before OAS age may help lower taxable income in retirement.
• Plan capital gains – Spread out property or investment sales over several years instead of cashing out in one year.
• Claim deductions – Make sure to apply all eligible deductions to reduce taxable income.

The OAS Clawback in 2025 is something every senior needs to understand. With the income threshold at $93,454, retirees who earn above this risk losing part or even all of their Old Age Security.

The three main red flags are high income from pensions or investments, large one-time property sales or withdrawals, and not using available tax planning options.

By carefully planning withdrawals, splitting income, delaying OAS, and using deductions, seniors can often reduce or completely avoid clawbacks. Taking the time to plan now will ensure you enjoy your full retirement benefits without surprises.

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