A Complete Guide To OAS Clawback (Recovery Tax): Tips to avoid it

[@daviddean6032]

Thank you again, Adam! ❤ It’s always a pleasure to listen to another video that you have produced and I know you put much hard work and time into it. Thank you, Adam.

[@ParallelWealth]

My pleasure!

[@Patrick-pv9pe]

The maximum OAS payout for 2023 was $778.45. I'm running a multi-million dollar portfolio and there's still many decades before I hit retirement age. Why would I re-arrange what will likely be an 8-figure portfolio by then so I can collect less than $800 in today's dollars? Sounds like the tail wagging the dog.

[@svenhodaka9145]

Patrick-pv9pe you’re doing fine and sounds like you’ll never even miss OAS. In fact it’s not intended for your situation. I’m sure you’re carefully utilizing all possible registered accounts and non-registered accounts to ensure optimal tax strategy for capital gains, dividend income, interest income for your personal tax filing or that of your estate. 👏

[@wayneandrews1022]

Adam, I’d love to see a video on what happens after a senior has experienced clawback. My MIL generously withdrew from her RIF to benefit her family and was 100% clawed back, which she paid as part of her 2023 return. Now the CRA has sent her a letter saying they’ll withhold OAS starting July 2024 for a year UNLESS she fills out the T1213OAS form (which we have) and send all supporting documents *in triplicate* (information CRA already has!). Then they will take at least 2 months, according to the form, to consider her case. I’ll let you know how this goes. I predict that by the time they finish reviewing and asking questions, she will have filed her 2024 taxes and they will realize she didn’t have enough income to put her over the 2024 threshold. So they have effectively borrowed her OAS interest-free for a year. This process seems calculated to frustrate and confound seniors into throwing up their hands and waiting a year or two (that they may not have) for it all to come out in the wash. Just another example of poor treatment of seniors by our government.

[@FrankRussell-d5q]

I want to get all my OAS clawed back. I have done well inspite of the Government. I hope to continue to do so and look after myself.

[@harveythompson6951]

I agree. I find it ridiculous how people making six figures in retirement look for ways to move Heaven and Earth so as to minimize the clawback of their OAS. It is a social program that the govt can't afford and they should eliminate it and revamp the GIS to benefit more those who actually need it.

[@gwarlow]

@user… Then simply do not apply for it. ;-) There are many Canadians who Do need it.

[@rettbutler1312]

Nice to read this - so many well-off people trying to game the system here to get a subsidy originally designed for the poor - it has been means-tested throughout most of its almost 100-year history, and for good reason.

[@svenhodaka9145]

@@rettbutler1312What if some people are using the OAS amount they receive by effective tax planning as the amount they donate to charities?

[@heatherbee8848]

I work for CPP and OAS. One thing I want to add to this video is that the tax or the claw back is not taken from you but rather taken and put towards your tax bill. I've heard it explained that the CRA doesn't want you to be left with a big tax bill at the end of the year so they very graciously help you with that. Also, the thing to keep in mind is that OAS and GIS index is four times per year. So what the maximum is right now will change next quarter. For people who want to calculate what their clawback would be, just subtract the lower threshold amount from your income. Whatever the difference is, take 15% and that will be your clawback. Divide it by 12 to represent 12 months of the year and that will be your monthly deduction from your gross benefit. If your income is above the higher threshold, you'll have your entire OAS clawed back

[@ronskrobutan7635]

Great informative comment ! I have never herd anyone explain the tax implications of the claw back or the formula to figure out the claw back from our income. Good Job ! and Thank you.

[@garth217]

OAS CLAWBACK. It's nothing more than punishing people who worked hard, saved, and invested and paid high taxes their whole lives

[@svenhodaka9145]

Redistribution of wealth. Wait until UBI becomes a thing!😳

[@bl9531]

It’s really no different than our progressive tax system as a whole … high earners pay through the nose. Between the minimum and the maximum OAS clawback there is an implicit marginal tax rare of as high as 65% (assuming a 50% marginal tax rate +15% clawback). So some people who contributed to an RRSP are paying a higher implicit marginal tax rate than when they made the contribution.

[@gordthompson824]

Totally agree. Those that paid in the most receive the least. It should be universal. The high wage earners would be pay back half in taxes anyway. Also would be easier for CRA to administer. Who knows how much money is wasted deciding who receives and how much. It becomes more ridiculous when you cash an RRSP for a new roof and this puts you into a clawback situation.

[@APICSKH]

Socialism at its best

[@ronbonora7872]

I agree.

[@sp90009]

Thanks Adam, very informative! Side note: with new federal dental plan, they also gonna claw back your teeth - partially or fully - after 70k/90k of household income. Tax planning in retirement becomes more important than ever!

[@rettbutler1312]

These programs are for poor people - helping poor people keeps them out of tents on your streets. It lowers your healthcare costs and makes you a better person.

[@sp90009]

Well, median household income is about 70k, and even less than that for retirees. So these programs are going to become a part of the picture for majority of the retired Canadians.

[@Grimenoughtomaketherobotcry]

​@@sp90009Not if they already have private dental insurance, or they're "eligible" for it. Lots of people who think they qualify will be disappointed. It's set up so the government won't be competing with the insurance companies, because they're mainly insuring those who can't afford it.

[@brucegarrod8674]

For those of us building a dividend income, beware its the grossed-up dividend income that is included when determining if clawback applies. In my case the gross up moved me about $10K closer to the clawback without having received the money.

[@terryloubelle]

Can you do a video that explains retirement income splitting, CPP/OAS Pension Sharing, etc. Want to understand what retirement income can be split and when. Also want to understand how CPP/OAS Pension Sharing differs from income splitting.

[@evadeanu1]

Great info here Adam. Thanks for keeping us updated.

[@ronm6585]

Thanks Adam.

[@DoneByD]

@ParallelWealth - isn't the recovery tax just like any other with holding tax? IE if your income was very high in age 64 tax year and then no income in age 65 calendar/tax year any amount with held would be refunded to you when you file your tax return for age 65 year just like over contributions to EI, CPP or income taxes while working... Doug Runchey has an article about this on retire happy site titled "Understanding the OAS Clawback" dated Mar 16, 2020. Quoted summary and conclusion from that article below. "Summary Although the clawback is normally based on your income from the previous calendar year, you can request that the clawback be based on your current income if it is significantly lower. Although the clawback is normally based on your income from the previous calendar year, that is really just the estimated amount of your OAS repayment tax and the actual OAS repayment tax will be based on your income from the current year and using the current threshold amount. Conclusion There is no reason to be concerned about keeping your income low in your 64th year in order to avoid the OAS clawback."

[@careymeaway2024]

explain GIS please, and not everyone thinks having no spouse is a bad thing LOL

[@DoneByD]

Period Jan - March 2024 --- Single - Annual net income must be < 21,264 and you could qualify for up to $1,065.47/mth.... If income is above $21,264 you don't qualify for GIS... To qualify for GIS you have to be collecting OAS, Canadian or legal resident and live in Canada.

[@maryslapsys5141]

Any thoughts on explaining gis?

[@shanullajiwa2602]

Just a comment, 65 did not know RRSP is considered income ,the two banks did not mention it. It effects your OSA 😢

[@dvdvno]

OAS and GIS should be tax free and given to anybody 65 years or older, regardless of income. The gov lure the young ones with UBI, why not give some our way, especially after working 40+ years in this country.

[@rettbutler1312]

UBI is a great idea, and it would go to everyone, eliminating OAS and GIS.

[@mariovillella5315]

What happens if you pay the recovery tax for 12 months and then it turns out you are under the $90,997 for 2024?

[@Imjustsaying1961]

I wish I had used the TFSA in the years before retiring. A big miss on my part.

[@dianetownsend9813]

Pls look up what they count as income to trigger clawback...I think OAS itself is NOT counted in the calculation. We tend to think all income is included and it is not.

[@pladam7198]

The following is what they count as income to trigger clawback: Canada Pension Plan/Quebec Pension Plan Old Age Security RRSP or RRIF income Company pension Retirement annuity Your salary, if you’re still working.

[@heatherbee8848]

It's your net world income they look at when considering the recovery tax so it even includes income from foreign sources. The only thing they don't include is income tested benefits and OAS. That means OAS and GIS basically are not part of the calculation. Unfortunately everything else is

[@rosaroberto6480]

Adam, everyone wants a son like you! 😊

[@ParallelWealth]

Bahaha, I appreciate the kind words. Well my mom got 3, because my 2 brothers are a step above me yet.

[@CA-1954]

When you say stayed in Canada means physically present in Canada. If after 20yrs living in Canada I moved overseas for 10yrs before I reach 65 does that mean I was only in Canada for 20yrs and only receive 50% OAS.

[@APICSKH]

Correct

[@oldtechie6834]

You made too much money. This is unfortunate 😀 This is classic 😁 Give thumbs up!

[@RobSnow-ui4sz]

Great video as always. I have a question about OAS. If you tell them you don't want it at 65 does that also mean you don't get any of the other OAS benefits when you turn 65?

[@JohnLi-yq2ts]

I understand that one can get the maximum OAS if the person lives in Canada over 40 years since 18 years old. If I live in Canada 35 years when I am now 65 years old. If I defer my oas until I reach 70 years old, will I qualify for the maximum oas as I will live in Canada 40 year by then? Also, will I get 36% increase due to deferring oas for 60 months? Thanks for your advice.

[@APICSKH]

As per my understanding it’s based until the age of 65 and then 36% added if yo defer it to 70. Years in Canada are counted from the age of 18-65.

[@murraytown4]

What I don’t fully understand is how waiting to claim OAS will reduce the potential for the clawback. By delaying OAS you increase your benefit, which is taxable income. The more taxable income you have, the greater the possibility of the clawback. I could see this if OAS was not taxable, but it is.

[@elissapoh7782]

The idea is you melt down your RRSP faster in the years before you take OAS so there’s less of an effect in the later years.

[@Dom.Perignon123]

also, I believe if your previous income is above oas threshold, as it is based on previous year or two, then by delaying collecting oas (you are not creating additional taxable income) for the current year and thus your oas MAY be based on that year as opposed to higher previous year

[@d10k6]

OAS income is not considered income for the OAS clawback calculation

[@murraytown4]

@@d10k6 Incorrect. OAS benefits are taxable income. GIS benefits are not.

[@brucegarrod8674]

@@d10k6 not sure about that. OAS is included in TOTAL income (line 15000) which carries forward to the NET income (line 234000)

[@davidrockefeller2007]

Can you denounce Canadian citizenship as well? The. You get no clawback, pick up Mexican citizenship where they have only 10% capitol gains.

[@photoMorg]

Great video ! I'm in the process of selling investment properties this year which will put me over the max OAS limit I'm 65 in May 2025 so will have to wait till 2026 to collect (when would I apply in 2026) Thanks

[@ritad4085]

Thank you! How does clawback work if OAS is postponed to age 70? (Quebec resident here). Ty

[@heatherbee8848]

The clawback or recovery tax as it's called would work the exact same regardless of what age you took it at. Between the ages of 65 and 70. The only difference would be your voluntary deferral would increase your monthly benefit rate

[@goodtogo3]

Based on my 2022 taxes.......after selling a condo I was hit with capital gains tax at 50% of profits. That was addd to my income and ergo I owed $34,000. (income jumped from normal of $70000). This month I will have paid of debt but how to I get OSP back?

[@leothekitty8449]

How about doing a scenario on a couple that has a DB and a DC pension that has some personal savings. How would this affect OAS? Say.. Retirement @ 58 him 56 her They have 150k each in RSP and 125k each in TFSA. She has 500k in DC pension, His DB pension 55k/year plus 17k/ year (bridge 60-65) That would be interesting to see when CPP and OAS fit in. Should they have put less into RSP and more to TFSA? Thanks 😊

[@svenhodaka9145]

Asking for a friend 😉.

[@leothekitty8449]

I didn’t think Adam would bite lol. I appreciate all your videos! I’m in my late 40s.. getting my mind wrapped around retirement in 10 years. Your videos sure help in preparation for that! Sure will be working with a retirement investor. Hoping I’m on the right track for savings. The magic question “ how much do I need in retirement”. Thanks @parallelwealth 😊

[@ybc8495]

hi, for 2023 number is 86912 and the complete gone is 142609, If I only lived in Canada for 20 years before 65 so I am only entitled 50% of OAS thus my income at AVERAGE(86912,142609)=114760 will the OAS total gone? So my complete OAS gone is 114K not 142K?

[@APICSKH]

Correct, I don’t even think I will get or I would care even though I will be 42 years in Canada at 65. OAS isn’t for high income earners blessed people like you and me

[@ybc8495]

@@APICSKH Only blessed for our wisdom and hard work, so we can accumulate to a certain amount. I came to Canada 20 years ago with only 3,000 cash and my sharp brain.

[@letiziagallinari222]

I apply for the OAS not knowing there would be a clawback!!!!! Is there a was to ask gov’t to stop giving us the OAS so that we can wait for a year that we won’t have a clawback?

[@ronbonora7872]

nope!

[@ronbonora7872]

Having too much money per year is a very good problem to have. However, myself and other people in that boat feel foolish in doing all the things right in making money and then getting punished by this damn woke government!

[@kevinsmith5318]

Unfortunate that one is “penalized” for being single….

[@petervaneverdink448]

Being single is its own reward 😂

[@hakjaolai]

Thanks Adam for a very informative video. Regarding the current maximum claw back threshold (for age under 75) of $148,065, I assume it is for people taking out their OAS when they reach 65. For those who have been delaying their OAS payments, the maximum threshold will be higher, correct? For example, for a person who is turning 70 in 2024, lives in Canada for 40+ years , and who has delayed the OAS payment for 5 years, the maximum threshold will be $90997+(713.34*12*1.36)/0.15=$168,608, correct? Actually I have another question about counting years of residency in the context of OAS. Lets say a person lives in Canada for 35 years when he/she reached age 65, delays OAS payment for 5 years, and starts receiving payment when he/she turns 70. Will his/her payment based on 35 years or 40 years? Looking forward to hear from you.

[@misspethamhouse9072]

It would be 35 so not max OAS. Also, the government sets new limits every year. They take into account inflation.

[@ParallelWealth]

Correct, that threshold is based on taking it at age 65.

[@hakjaolai]

@@ParallelWealth Thanks so much

[@rettbutler1312]

You have great information on this channel, but it's always disturbing when you post tips to help wealthy people access funding programs that were literally designed to help the poor. It was introduced in 1927 as a means-tested benefit to help the poor. It has been means-tested throughout MOST of its history, even through name changes and periods where it ostensibly went equally to everyone. Why on earth would wealthy people need this money? Why are they doing everything they can to empty the pot and end the program that was designed to help the poor, including the millions of working poor who have worked for lousy wages all their lives? This kind of thing demonstrates very poor character.

[@harveythompson6951]

For being means tested the income level where clawback starts is way too high. The new dental program is the same, the family income level for eligibility is way too high for a government paid program that it can't afford. I say that as a retired dentist.

[@DoneByD]

The government makes the rules and all Adam's videos are doing is explaining the rules so everyone can understand them. If the thresholds are too high in your opinion that isn't the fault of Parallel Wealth. If you feel the rules should be changed you probably want to contact the people making the rules rather than commenting to a video on KZbin whereby someone is explaining the rules.

[@rettbutler1312]

@DoneByD He's not just explaining rules. He's giving advice about how to avoid the "clawback." He details how his own well-off father is taking his advice to grab some money meant for the poor. Shameful. There are several wealthy people in these comments who have said they're happily not in a position to qualify for OAS and will not take measures to grab it back. There certainly need to be legislative changes to prevent people like this from taking advantage, but that doesn't make taking advantage any less distasteful, shameful, and unethical. Law and goodness do not always align.

[@DoneByD]

@@rettbutler1312 we'll have to agree to disagree --- it's a social benefit and there are rules around receiving that benefit. I appreciate understanding the rules and all the strategies around those rules which help people qualify for the benefits or more correctly stated as avoiding the additional recovery tax. If you qualify and don't avoid the recovery tax that is up to you but don't hate on someone else because they decide to take the financial advice they're are entitled to under the rules of the plan. After all these people qualifying lived & probably worked in Canada paying 40 years worth of income tax which is the funding source for this social benefit.

[@rettbutler1312]

@DoneByD I'm not "hating on" anyone; this isn't a schoolyard - I am making a considered and experienced judgment about their values and ethical conduct. CPP is the entitlement of all Canadians who have worked. OAS is an entitlement of anyone who has lived here who may or may not have worked but who may not have enough savings for a dignified retirement. It truly was never intended for people who have amassed so much wealth that they don't have regular pensions and don't need CPP before age 71. Truly, the legislation needs to change to protect this resource for those it was intended for. I commend the wealthy people in this chat who wouldn't dream of collecting OAS. And yes, the rest are shameful. There's a difference between legal and moral entitlement - the entitlement of wealthy people who seek benefits intended to help the poor is of another sort altogether.

[@walltiger6603]

i wouldn't see a cent from OAS, which is ok. i feel like paying back to Canada, only wish the government doesn't waste the money, like officials dining out, taking vacations, on developing useless Apps, throwing out vaccines....billions are wasted every year.

[@ImVeryBrad]

Ya it's brutal. Just think how far it could go if it was well managed. Sad.

[@APICSKH]

Don’t Forget their pension plan is way better than yours and mine, I bet they will find a way to top up their pension with OAS