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OAS "Clawback" confusion?
March 9, 2019
2:07 pm
mw
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Thank you Norman1, very detailed explanation.

March 9, 2019
3:22 pm
Loonie
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Norman1 said
More specifically, it is the "net income before adjustments" on line 234 that would need to be kept below $75,910.

Net income is line 236 is one line too late. The OAS clawback has already been calculated by then using line 234.  

For 2019, the threshold is $77,580, not $75,910. This is the number you need for planning your income for this year. You ar can't do anything about last year's now.https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/recovery-tax.html

March 9, 2019
3:36 pm
Loonie
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AltaRed said
.

Note: The 15 cents on the dollar clawback is exactly a 15% federal tax credit like on a host of other tax credits like charitable donations.  

Using the charitable tax credit is not a good comparison. The charitable tax credit is more generous than that. The 15% is only what you get on the first $200 in donations. After that, you get 29%. And in addition to that, there is a provincial tax credit, which of course varies from province to province.
OAS, being a federal gift, is only clawed back federally.

March 9, 2019
5:18 pm
AltaRed
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Fair enough. My intent was to relate the OAS clawback to the 15% federal tax rate. It is that simple.

November 16, 2021
10:36 am
frugal lady
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So the OAS "clawback" amounts are based on the following:
Recovery tax period Income year Minimum Maximum
July 2021 to June 2022 2020 $79,054 $128,149
July 2022 to June 2023 2021 $79,845 $129,757

My husband deferred his OAS payments for a period of 28 months resulting in a 16.8% increase to his OAS payments.

My question is does anyone know if this deferral effects the Minimum and/or Maximum threshold at all for him? ie would his Minimum amount be increased by 16.8% of $79,845 for the 2021 tax year?? I thought I read somewhere that it did but I cannot find the source.

November 16, 2021
11:28 am
Norman1
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The income threshold for the start of OAS clawback does not change. There's no adjustment to the threshold in the Federal Worksheet for calculating the OAS clawback (Line 23500). The starting threshold is the same regardless of the amount of OAS.

If one does receive more OAS because of deferring it, then more income than the Maximum in that table will be needed to completely claw the higher OAS back.

Similarly, if one receives less OAS because one didn't live in Canada for 40 years (after age 18), then the lower OAS will be completely clawed back before income reaches the Maximum in the table.

November 16, 2021
1:26 pm
frugal lady
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thanks Norman 1

November 17, 2021
4:28 am
bhuc
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It just occured to me that if One knows or can project their Net Income at age 70 to be greater than the maximum clawback threshold amount why would they wait to start to receive OAS at 70.
That would mean if they waited to get the enhanced amount at age 70, their total OAS income would be clawed back immediately.
This is a real possiblity if One starts to recieve income from a RIF at age 70.
So in essence they would have forgone all those years of OAS for nothing.
Then it would make sense to start OAS at 65 under these circumstances.
Cheers B

November 17, 2021
5:42 am
dougjp
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bhuc said
It just occured to me that if One knows or can project their Net Income at age 70 to be greater than the maximum clawback threshold amount why would they wait to start to receive OAS at 70.
That would mean if they waited to get the enhanced amount at age 70, their total OAS income would be clawed back immediately.
This is a real possiblity if One starts to recieve income from a RIF at age 70.
So in essence they would have forgone all those years of OAS for nothing.
Then it would make sense to start OAS at 65 under these circumstances.
Cheers B  

I couldn't agree more. Probably like most people, I never seriously considered the tax hit from RRIF withdrawals until that was about to start. Sure, we knew withdrawals were taxable, but the other ramifications - OAS clawback and the effective tax rate too. Furthermore, when you die, the entire RRIF becomes income in that year. I wonder what that does to OAS clawback for payments already made that year!

"I saw a subliminal advertising executive, but only for a second." ~ Steven Wright

November 17, 2021
6:09 am
savemoresaveoften
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bhuc said
It just occured to me that if One knows or can project their Net Income at age 70 to be greater than the maximum clawback threshold amount why would they wait to start to receive OAS at 70.
That would mean if they waited to get the enhanced amount at age 70, their total OAS income would be clawed back immediately.
This is a real possiblity if One starts to recieve income from a RIF at age 70.
So in essence they would have forgone all those years of OAS for nothing.
Then it would make sense to start OAS at 65 under these circumstances.
Cheers B  

which again brings back my displeasure that there sb no OAS clawback at all, esp since its already a taxable income...

November 17, 2021
9:08 am
Bill
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OAS can be clawed back on the final return in the year of death if income exceeds the threshold.

Younger people generally ignore the later impacts as it's hard to imagine you'll have that much income without working, then you find out later it can happen.

Generally I agree with the concept of OAS clawback, the whole tax system is based on taking from those that have and redistributing it to others and the OAS clawback blends nicely with that concept.

November 17, 2021
10:51 am
savemoresaveoften
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Bill said
OAS can be clawed back on the final return in the year of death if income exceeds the threshold.

Younger people generally ignore the later impacts as it's hard to imagine you'll have that much income without working, then you find out later it can happen.

Generally I agree with the concept of OAS clawback, the whole tax system is based on taking from those that have and redistributing it to others and the OAS clawback blends nicely with that concept.  

Those that "have" had already paid more tax throughout their entire life than those "dont have". OAS clawback is just a slap in the face and say "yes our tax system is also a welfare system, and you will continue to get punished via high tax / no benefits for being hard work / successful. A poor person being old is more valuable than a wealthy person being old" It just have all the wrong incentives...

November 17, 2021
1:07 pm
Bill
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I agree, smso, about incentivizing the wrong stuff, though I do think most people would agree with fairly-wealthy people (many of whom have arranged their affairs to pay minimal, if any, income tax) having OAS clawed back, no? So if society agrees with that principle then it just remains to argue about where the line is drawn.

And I don't know about slap in the face, I don't imagine there are too many seniors making over $126K/year who are that fussed about not getting any OAS.

November 20, 2021
6:43 am
RetirEd
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Well, I have certainly had to listen to bitter rants about the OAS clawback from some VERY wealthy people who got their cash from marriage or inheritance, so we can't assume they're all cool with it. "Too much is never enough," and all that.

I have, as I have noted previously elsewhere, chosen to start my CPP and OAS at the earliest possible year, as I had limited prospects of earned income by that time. Fortunately, that date was also near the end of the calendar year, so I had one year of very low income to means-test before the pension income started decreasing my benefits.

If that's not when your birthday comes around, you may want to make calculations based on starting near the end of the year. Don't wait past October as processing delays may result in a large retroactive payment inflating your following year, cutting benefits even more than they would have with a larger partial first year.
RetirEd

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