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.
Learn more: How Does Old Age Security (OAS) Pension Work?
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. |
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 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.
Learn more: T4 vs. T4A: What’s The Difference?
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 2024 was $90,997. If your income in 2024 was $100,000, then you would have to pay 15% on the difference between $100,000 and $90,997:
$100,000 (your 2024 income) – $90,997 (recovery threshold) = $9,003 $9,003 x 15% = $1,350.45 |
In this example, you would have to pay a recovery tax of $1,350.45 for the recovery tax period of July 2025 to June 2026.
Learn more: How To Avoid The Old Age Security (OAS) Clawback?
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.