How Much Income Can You Earn While Receiving OAS?

OAS and supplemental income

Good question, Cindy. The amount of Old Age Security (OAS) you receive can be reduced if your total net income from all sources is high enough. To answer your question usefully, consider a few related factors:

1. Will you also receive Canada Pension Plan (CPP) or other pension income? All of that counts toward your net income and can push you into the OAS recovery (clawback) zone.
2. How much of your OAS are you willing to forgo if your income triggers a clawback?
3. Would it make sense to delay claiming CPP or OAS to reduce or avoid the clawback?

The OAS recovery tax is based on your net income from worldwide sources. There isn’t a single cutoff where you lose the entire OAS; instead, there is a gradual recovery zone. In 2024 the recovery zone begins at $90,997 and continues upward until a higher limit where OAS would be fully recovered. That initial threshold is indexed annually to inflation (the Consumer Price Index).

How much OAS do you lose when you work in retirement?

The OAS recovery rate is $0.15 for every dollar of net income above the initial threshold. To illustrate, suppose your net income is $100,000. That is $9,003 above a $90,997 threshold. Multiply $9,003 by 15% and the recovery tax equals $1,350. If the full OAS entitlement in that example is $8,752, you would repay $1,350 before tax; after applying a typical marginal tax rate (for example, 30%), your out-of-pocket reduction in spending power would be roughly $945. Depending on your situation and priorities, you may consider that acceptable.

How CPP and other pension income affect OAS

The OAS clawback is calculated on your total net income, so CPP, OAS, pension payments, rental income, dividends, interest and taxable capital gains all count. If you earn a $100,000 employment salary and also receive $15,000 in CPP and $8,732 in OAS, your net income for the clawback calculation becomes $123,732. In that case the recovery tax equals:

( ($123,732 – $90,997) × 15% )

That works out to a recovery of $4,910 from your OAS payment.

Splitting income with a spouse

When you’re in the clawback zone, look for legal ways to reduce taxable net income or to split income between spouses. If you have a defined benefit (DB) pension you can generally split that pension income with your spouse at any age. At age 65 you also become eligible to split registered retirement income fund (RRIF) payments with a spouse. Be aware that employment income cannot be split by age; only eligible pension income can be split for tax purposes once you reach the required age.

Many people mistakenly believe regular employment income can be split after age 65; that is not the case. Only pension income qualifies for pension income splitting.

What to do if you face an OAS clawback

If your projections show you’ll lose some or all of your OAS, consider options such as delaying CPP and/or OAS. Delaying CPP often carries a larger monthly increase (0.7% per month delayed beyond age 65), whereas OAS increases by 0.6% per month delayed. Moreover, CPP has no clawback, which often makes delaying CPP a higher priority for many people.

Most Canadians are automatically enrolled in OAS at age 65; if you prefer not to start OAS immediately you must apply to stop it. You have six months after OAS starts to choose to stop it, and you can receive a higher monthly payment by delaying. Delaying OAS produces a 0.6% monthly increase (7.2% per year), so delaying until age 70 yields a 36% increase in the base OAS amount.

Why delaying OAS can help

Delaying OAS not only raises your monthly benefit but also raises the upper threshold of the clawback zone because the clawback formula is based on the OAS amount. For example, if OAS at age 65 would be $8,732, delaying to age 70 increases that to $11,875 (a 36% rise). Using that higher OAS figure in the recovery formula, the upper limit before OAS is fully recovered increases to roughly $170,163—about $25,000 more than if you took OAS at 65.

Calculation for the extended upper limit looks like this:

( ($11,875 ÷ 0.15) + $90,997 )

Delaying also increases future inflation adjustments and yields a larger 10% boost on your 75th birthday based on the higher starting amount. For example, a 10% bump on $11,875 adds $1,187, compared with $872 if the OAS started at $8,732—further helping to extend the effective clawback threshold over time.

Should you delay OAS if you plan to work?

Start by checking your latest tax return to see your net income from the previous year, then add any expected 2025 income, including projected CPP and OAS if applicable. Use those figures to estimate whether you’ll enter the OAS recovery zone. Your accountant or a financial planner can help run projections that model outcomes if you take or delay CPP and OAS. Also check the published OAS thresholds for 2025 once they’re available, since the initial threshold is adjusted annually for inflation.

Careful planning—considering pension splitting, delaying benefits, and managing taxable income—can often reduce or avoid an OAS clawback. If you’re unsure, get personalized advice so you can weigh the trade-offs given your health, life expectancy and retirement goals.

Cindy, I hope this guidance helps you decide how to manage work and public pensions as you approach 65.

Read more about Old Age Security:

• What are the OAS payment dates?
• Should you apply for OAS even with a high income?
• OAS entitlement and deferral rules for immigrants to Canada
• How to avoid OAS clawbacks after a temporary income spike