Old Age Security (OAS) is a non-taxable benefit in the sense that it's not based on contributions — but it is subject to a recovery tax (the "clawback") once your net income exceeds a threshold.
How the clawback works
For every dollar of net income above the threshold, 15 cents of OAS is recovered. The threshold is indexed annually. If your income is high enough, you can lose the entire benefit.
What counts as "net income"
The clawback is based on your net income before tax (line 23600 on your return), which includes CPP, OAS itself, pension income, RRIF withdrawals, RRSP income, investment income, and most other sources. TFSA withdrawals and the capital portion of non-registered accounts do not count.
Strategies to reduce clawback
- Defer OAS to 70. You gain 0.6%/month (max 36%) and delay the income — useful if your 60s income is already high.
- Smooth taxable income. Drawing RRSP more evenly across years (rather than large lumps) keeps you under the threshold each year. The tool's tax-smoothing target is built for exactly this.
- Use TFSA and non-reg first for top-up cash, since they don't add to clawback income.
- Split pension income with a spouse if eligible (the tool models single filers, but splitting can materially lower the higher earner's net income).
See it in the tool
The yearly breakdown table shows an "OAS Clawback" column. Watch it light up when your taxable income crosses the threshold — and watch it disappear when you lower your tax-smoothing target or defer OAS.