CPP Income Avoid OAS Clawback, Income Splitting with a Spouse? The OAS clawback is a mechanism that reduces OAS payments based on the retiree’s income. It is assessed annually based on net income reported on your tax return. The more income, the more clawback and potentially a full reduction if it exceeds a threshold set for these purposes.
This will therefore include in your calculation of net income, the Canada Pension Plan CPP such that if you take any benefits from CPP means there is a possibility to get OAS clawback work for you against. Supposing you already have other sources of income totaling to $80 000 and CPP that are to total $20 000 meaning that your total then comes to $100,000 that is more than clawback limit, yet, you are subjected to partly to clawback on your OAS.
CPP Income Avoid OAS Clawback Overview
| Delay CPP and OAS Benefits | Reduces taxable income in early retirement, increasing future payouts. |
| Income Splitting | Shifts taxable income to a lower-income spouse, reducing individual income. |
| Early RRSP Withdrawals | Lowers taxable income during OAS years by withdrawing RRSPs earlier. |
| Contribute to a TFSA | TFSA withdrawals are non-taxable and don’t count toward the OAS clawback threshold. |
| Invest in Tax-Efficient | Assets Minimizes taxable income using dividends, capital gains, or tax-free accounts. |
| Make Charitable | Donations Reduces taxable income through donation tax credits. |
CPP Income and OAS Clawback
| Income Level | Impact on OAS |
| Below $86,912 | No clawback applied. |
| $86,913 to $142,466 (approx.) | Partial clawback (15% on excess income). |
| Above $142,466 | Full OAS clawback; no benefits received. |
Strategies to Avoid OAS Clawback
| Age | Increase in CPP/OAS Benefits |
| 65 | Standard benefits start. |
| 66 | +8.4% per year. |
| 70 | +42% (maximum delay increase). |
Income Splitting with a Spouse
| Scenario | Taxable Income | (Individual) Impact |
| Without income splitting | $90,000 (primary) / $30,000 | OAS clawback for primary earner. |
| With income splitting | $60,000 / $60,000 | No OAS clawback. |
Estimated OAS Clawback at Different Income Levels
| Income Level (CAD | Clawback Rate (15%) | OAS Clawback Amount (Approx.) |
| $90,977 – $100,000 | 15% | $1,350 |
| $100,001 – $110,000 | 15% | $2,850 |
| $130,000 – $140,000 15% $7,350 | 15% | $7,350 |
| $149,000+ | Full Clawback | Complete OAS Reduction |
Important Link
| Homepage | Click Here |
Frequently Asked Questions
1. What is the OAS clawback?
The OAS clawback is officially known as the OAS Recovery Tax. It takes away some of your OAS benefits if your net income exceeds the annual threshold, such as $86,912 for 2024.
2. How does CPP income impact the OAS clawback?
CPP income will increase the net income and this may actually push your money above the OAS clawback level.