How OAS Recovery Tax (Clawback) Actually Works

OAS clawback can be confusing, so in this video I want to breakdown an example of how it could impact you. It's important to understand that OAS clawback is simply a withholding tax, and the amount withheld is treated like an income tax instalment. We'll discuss this more in this video.

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DISCLAIMER: This presentation is for informational purposes only and should not be considered financial, investment, tax, or estate planning advice. All investments carry risk, and past performance does not guarantee future results. Any forward-looking statements are based on assumptions and may not reflect actual outcomes.

The content on this channel is for educational purposes only and does not provide specific investment or planning recommendations. Viewers should consult a qualified professional for retirement, tax, or estate planning guidance. Parallel Wealth and Adam Bornn are not responsible for any decisions made based on this content.

[LowLightMike]

Thanks for this video. This is a good reminder that Withholding Taxes (whether on salary, RRSP/RRIF withdrawals, CPP or OAS etc) is just a temporary statutory calculation administered by the payer.
The actual real tax is calculated on an overall annual basis by the taxpayer on the annual T1 personal tax return, and that's where and when things are squared-up.
I like your point that the temporary cashflow issue is a real impact for some people. That's where other on-hand savings (personal liquidity) are key.

[flcMorsalin]

Great explanation of the OAS Recovery Tax! It’s a complex topic, but you broke it down clearly and made it easy to understand how the clawback works. This is definitely something all retirees or soon-to-be retirees need to be aware of. Thanks for the helpful info!

[jjlad]

I was in a similar situation. As I'm apposed to pre-paying taxes, I filed a T1213(OAS) in order to have the CRA STOP withholding the OAS clawback. Be proactive and file a T1213(OAS) at the same time your apply for your OAS.

[Replan]

Why we focus on net income when talking about OAS clawback? Some people might be freaking out confusing it with Gross income. And considering you can split this with spouse or your partner, someone need to do really really great to get theirs OAS clawed back. And it’s a good problem to have 🎉!! 😊

[ramspace]

Let us not forget that dividend income is "grossed up" by 38%, and that the new number becomes part of the income that is calculated for the OAS clawback. It was an Ouch moment for me.

[jminnv]

Another helpful video, thanks.
I am hesitant to add to the pot shots taken at this low hanging fruit, but even with correct documentation submitted and based on delays I encountered with a CPP revision request, it's probably best to keep things as simple as possible for this federal department by deferring OAS if you are over the clawback threshold (& it's possible from a cash flow perspective).
My spouse (4 yrs younger) will retire before mid-2026 and defer OAS until at least mid-2027 (after Notice of Assessment rec'd for tax year 2026).
Hopefully that keeps everything as clean as possible without any of the back and forth re witholding/prepaid taxes causing any confusion/delay for the folks in the pensions branch.

[donovjo]

great video as usual. If the OAS is fully clawed back in 2024 but then refunded fully in 2025, do you now have be careful of being bumped into a higher tax bracket for 2025 because now you are received double the OAS payments due to the full refund from 2024?

[urbanoutdoorsman]

Can you talk about how non-registered dividends are treated in the calculation of income as it relates to the OAS clawback

[kathleenladewig]

Even if the there is an OAS catchup in later years as the calculation changes based on the most recent year’s income, doesn’t that “catchup” amount become taxable income in the current year which could once again bump you into a clawback situation? It could be a few years before the income this process smooths out.

[hydrogolfer]

Curious, for this example if Rick also made $200k in 2025 and also took OAS in 2025, then made $85k in 2026 would he get back the clawback from 2025 when he files his 2026 taxes?

[CentauriCentauri]

I wish this was something I needed to worry about! LOL I will not get clawed back!

[JohnLi-yqts]

So if i understand correctly that oas claw back for 2024 is still base on your 2024 net income even thought if you got clawed back for your 2024 oas completely due to over $130k net income in 2023 and 2022. If your actual net income for 2024 is less than $90k, you will still get back all your 2024 oas amount after July 2025 once you filed your 2024 tax returns? Does it mean you will get a lump sum 2024 oas refund to you and then you will also get another lump sum for January to June 2025 oas refund together in July 2025? Then you will get the regular monthly oas payment for July 2025 onward? It seems very complicated to calculate. Or the lump sum 2024 oas will only pay back to you as a refundable tax credits when you file your 2025 tax returns? As you need to file the 2024 oas give back to you as your taxable income, so which tax year, 2024 or 2025 tax returns that you need to report this 2024 oas income? Thanks for your advice.

[davidzwicker]

Great that CPP is not included in the OAS clawback calculation.

[garth]

When does "Rick" start working at Parallel Wealth? How much OAS clawback will Rick incur due to his new employment?

Rick has paid $75, 500/ year in taxes for each year of 2022 and 2023. $150, 000. For the privilege of paying that amount Rick gets nothing upon reaching 65. OAS clawback is a tax on success. The top 20% of income earners pay over 60% of ALL taxes. Hard work is penalized in Canada