Old Age Security (OAS) is a monthly benefit from the Canadian government paid out to Canadians aged 65 years and older. Payments are designed to help financially support older Canadians throughout retirement. But after you’ve collected these monthly payments, will you need to pay taxes on them?
Key Takeaways
- Yes, OAS is considered taxable income in Canada.
- You must report your OAS payments on your income tax return.
- The rate at which OAS is taxed depends on your overall income and marginal tax rate.
Is OAS Taxable?
Yes, OAS benefits are taxable. You must report the payments you receive from OAS as income on your tax return. The amount of tax you pay depends on federal and provincial income tax rates, which are based on your total income for the year.
| What Happens If You Don’t Report OAS Income? Not reporting OAS income can result in reassessments, interest charges, penalties, and potential benefit repayment. The CRA receives copies of your T4A (OAS), making discrepancies easy to detect. Filing accurately and on time helps avoid unnecessary complications and protects your benefits. |
Are Taxes Deducted Automatically From OAS Payments?
No, taxes are not automatically deducted. However, you can request to have federal income taxes deducted from your monthly payment in the following ways:
- Through your My Service Canada Account
- Mailing or dropping off a completed Request for Voluntary Federal Income Tax Deductions CPP/OAS form at a Service Canada office
You may be required to pay your income tax every quarter if you don’t request monthly tax deductions.
What Is The Tax Rate On OAS Payments?
The tax rate on your OAS payments depends on your overall income and marginal tax rate. As such, there isn’t a specific OAS tax rate. Ultimately, the more income you earn, the higher your marginal tax rate will be applied to your income.
Let’s assume as a single senior you receive income from the Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS).
| Example: – Place of residence: Ontario – CPP income: $10,800 (taxable) – OAS income: $8,732.04 (taxable) – GIS income: $13,042 (not taxable) – Total annual income: $32,574 – Total taxable income: $19,532.04 An income of this amount would put you in the marginal tax rate bracket of 20.05%. Your total estimated taxes owed would be $722. Do note, in Canada, we have a basic personal amount which allows you to earn a certain amount of income without tax. |
Note: These numbers are estimates based on the Turbotax income tax calculator.
What’s The Tax Rate If You Live Outside Of Canada?
If you live outside of Canada, then your OAS payments are charged a 25% non-resident tax, which will be deducted from your monthly OAS pension payments. However, your rate may be reduced or exempted if there’s a tax treaty between Canada and the country you currently live in.
It’s also important to make sure you still qualify for OAS payments if you live abroad. You can still qualify if you meet one of the following criteria:
- You lived in Canada for at least 20 years after you turned 18 years of age.
- You lived and worked in a country with a social security agreement with Canada for at least 20 years.
How Does OAS Pension Work?
The OAS pension provides monthly income to seniors aged 65 and older who meet Canadian residency requirements. You don’t need to contribute to qualify; instead, eligibility is based on how long you’ve lived in Canada after age 18.
Payments can start at 65 or be delayed for a higher amount. The benefit is taxable, with higher‑income seniors potentially facing a clawback.
Learn more: How Does Old Age Security (OAS) Pension Work?
How To File Your Taxes With OAS
To file your taxes with OAS payments, follow these steps:
Step 1: Gather Necessary Documents
Service Canada will send you a T4A (OAS) slip at the end of the tax year if you receive OAS payments. This slip includes information about your OAS pension amount and any tax withheld.
Step 2: Complete Your Income Tax Return
Report the amount from box 18 of your T4A (OAS) slip on line 11300 of your tax return. Any Guaranteed Income Supplement (GIS) or Allowance you received will be shown on box 21 of your T4A (OAS) slip, which should be reported on line 146001.
Step 3: Submit Your Tax Return
File your income tax return with the Canada Revenue Agency (CRA) before the deadline to ensure you don’t incur any additional interest penalties or fees.
Can You Reduce The Tax You Pay On OAS?
You can’t avoid paying tax on OAS entirely, but there are strategies that may help reduce the overall tax burden, including the following:
- Splitting eligible pension income with a spouse
- Timing RRSP withdrawals strategically
- Using Tax-Free Savings Accounts (TFSAs) for retirement income
- Deferring OAS payments to receive a higher monthly amount later
| Should You Delay OAS to Reduce Taxes? You can choose to delay OAS payments past age 65, until age 70. For every month you delay, your OAS payment increases by 0.6%, resulting in up to a 36% increase. Delaying OAS may make sense if you expect your income to be lower later in retirement or want to reduce the likelihood of triggering the OAS clawback during higher-income years. |
Learn more: How Does Pension Income Splitting Work?
What Is OAS Recovery Tax?
If your income exceeds a specific threshold, you’ll need to repay 15% of that amount. This is known as the OAS recovery or clawback tax. Your repayment is based on the difference between your income and the threshold amount for that year.
For instance, the recovery threshold for 2025 is $93,454. If your income in 2025 was $100,000, then you would have to pay 15% on the difference between $100,000 and $93,454:
| $100,000 (your 2025 income) – $93,454 (recovery threshold) = $6,546 x 15% = $981.90 |
In this example, you would have to pay a recovery tax of $981.90 for the recovery tax period of July 2026 to June 2027.
Do Provincial Taxes Apply to OAS?
Yes, provincial income tax applies to OAS payments in addition to federal tax. The exact amount depends on your province of residence and total taxable income.
How Other Retirement Income Affects OAS Taxation
Your OAS payments are taxed alongside other income sources. Common retirement income streams that can increase your taxable income include the following:
- Canada Pension Plan (CPP)
- Registered Retirement Savings Plan (RRSP) withdrawals
- Workplace pensions
- Investment income
- Rental income
As your total income increases, you may move into a higher marginal tax bracket or trigger the OAS clawback, which can reduce the net benefit you receive.
| How OAS & GIS Work Together While OAS is taxable, the Guaranteed Income Supplement (GIS) is not. However, GIS eligibility is income-tested and reduced as taxable income increases. This makes accurate reporting of OAS income essential, as misreporting can affect your GIS payments and future benefit calculations. |
Bottom Line
Collecting OAS payments can certainly be helpful during retirement, but you’ll still need to pay tax on those benefits. OAS is considered taxable income, so you’ll need to add these payment amounts to your overall income when you file your taxes. Make sure you understand the implications of OAS taxation to accurately handle your finances and avoid tax issues. Working with a skilled tax specialist can help ensure you have all your bases covered.
