Seniors — OAS, CPP & Tax — finance-forge.ai

Once you turn 65, the tax system treats your income differently. This page summarises the major senior-specific items: OAS and the clawback, CPP, the age amount, the pension-income amount, GIS, and pension income splitting.

OAS — Old Age Security

OAS is a federal monthly benefit paid to most Canadians from age 65, funded from general revenue (not from prior contributions). Eligibility depends on years of Canadian residence after age 18 — 10 years for partial OAS, 40 years for full OAS.

OAS is taxable income. You may defer OAS up to age 70 in exchange for a permanent 0.6% per month increase (up to 36% larger benefit if deferred a full 60 months).

OAS clawback (recovery tax)

If your net income for the year exceeds a threshold — approximately $90,997 in 2025 — OAS is reduced through a 15% recovery tax on the excess. The benefit is fully clawed back once net income reaches approximately $148,179 (the second threshold).

CPP retirement pension

You can start CPP as early as age 60 with a permanent reduction (0.6% per month before 65), or defer up to age 70 for a permanent increase (0.7% per month after 65). Taking CPP earlier produces a smaller monthly amount but for more years; taking it later produces a larger monthly amount but for fewer years.

The “break-even” age — at which total CPP collected matches across two start ages — is typically in the early 80s for a 60-vs-65 comparison and the late 80s for a 65-vs-70 comparison.

CPP is taxable income.

Age amount

A non-refundable tax credit of $8,790 (2025) for individuals 65 and older, phased down once net income exceeds approximately $44,325 and eliminated above approximately $102,925.

See Non-Refundable Tax Credits for the full list of credits available.

Pension income amount

A separate non-refundable credit of up to $2,000 against pension income that qualifies (typically RRIF withdrawals, lifetime annuity payments, or a defined-benefit pension). The credit is worth up to $300 federally (15% × $2,000) plus a smaller provincial amount.

A common planning move is to convert a small portion of an RRSP to a RRIF at age 65 specifically to qualify for this credit.

Pension income splitting

If you receive eligible pension income (DB pension, RRIF withdrawals after age 65), you can elect to allocate up to 50% of it to your spouse on your return. The split reduces your taxable income (and helps with OAS clawback mitigation) and shifts tax to the spouse at their — typically lower — marginal rate.

The election is annual and you do not need to actually transfer the cash; it is purely a tax-return mechanism.

GIS — Guaranteed Income Supplement

For low-income seniors receiving OAS. GIS is non-taxable but income-tested aggressively. The 50%-on-the-dollar clawback means that for low-income seniors, even small additional CPP, RRSP, or RRIF amounts can produce very high effective marginal rates after GIS reduction is factored in.

For most seniors with even modest retirement savings, GIS will not apply; for those approaching the GIS-eligible income range, the planning is the mirror image of OAS-clawback planning.