As Canadians plan to spend an average of $3,825 on summer travel in 2025, many seniors collecting Old Age Security (OAS) might be enjoying retirement—but they also risk unexpected tax consequences.
The Canada Revenue Agency (CRA) is increasing its scrutiny, especially on retirees whose income dynamics are more complex than they realize.
If you’re an OAS recipient, it’s essential to understand how your income, investments, and withdrawals can trigger CRA attention. Here are the 3 biggest red flags the CRA is watching closely in 2025—and how to avoid them.
What Is OAS and How Does It Work?
Old Age Security (OAS) is a monthly benefit available to most Canadians aged 65 and older. It is income-tested, which means your net income determines whether you receive the full benefit or face a clawback.
For 2025, the OAS repayment threshold begins at $90,997. If your net income exceeds this amount, the CRA will reduce your OAS payment by 15 cents for every dollar above the threshold.
That’s why accurate income tracking is essential. Many retirees unintentionally cross the threshold due to unexpected income sources or poor financial planning.
Red Flag #1: Underestimating Your Total Income
It’s easy to think your income only includes your CPP and OAS payments, but the CRA counts all sources of taxable income, including:
- Pension income
- RRIF or RRSP withdrawals
- Capital gains
- Dividends
- Rental income
- Part-time or freelance earnings
For retirees relying on dividend stocks or capital appreciation, this can be problematic. For example, Hydro One (TSX: H) is a popular dividend stock among seniors and currently yields about 2.7%.
While stable, that income adds to your net amount, and a strong investment year can push you over the OAS clawback limit.
Here’s how a $15,000 investment can impact your income:
| Stock | Investment | Dividend/Yield | Annual Income |
|---|---|---|---|
| Hydro One | $14,977.00 | $1.33 per share | $404.32 |
If you hold multiple investments like this, you may be generating thousands in extra income without realizing its effect on OAS.
Red Flag #2: Failing to Report All Tax Slips
Retirees with diverse portfolios—especially those holding dividend-paying stocks in non-registered accounts—may forget to include every slip come tax season. This is a major issue in 2025 as CRA’s systems now automatically match tax slips to filed returns.
Common situations where slips get missed:
- Switched brokerages mid-year
- Reinvested dividends or DRIPs
- Foreign income from U.S. or international stocks
Even a small unreported amount can trigger:
- Reassessments
- Late payment penalties
- Interest charges
To prevent this:
- Keep a master list of all your investment accounts
- Consolidate where possible
- Download slips early and compare with your CRA My Account
Red Flag #3: Unplanned Withdrawals from RRSPs or RRIFs
With inflation still high, more retirees are tapping into Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) to cover living or travel expenses.
While this might feel like a smart short-term fix, large or frequent withdrawals can:
- Push your total income above the OAS clawback threshold
- Trigger higher marginal tax rates
- Affect GIS (Guaranteed Income Supplement) eligibility
If you withdraw $10,000 more from an RRSP in 2025 to pay for travel or medical bills, and your income is already close to $90,000, it could cost you more than $1,500 in OAS clawbacks.
CRA Red Flags for OAS Recipients
| Red Flag | What It Means | Impact |
|---|---|---|
| Underestimating total income | Ignoring dividends, capital gains, pensions, rental income | OAS clawbacks above $90,997 |
| Missing tax slips | Not reporting all investment income accurately | Reassessments, penalties, interest |
| Unplanned RRSP/RRIF withdrawals | Withdrawals for lifestyle or travel without tax planning | Higher taxes and OAS repayment |
Tips to Protect Your OAS Benefits
- Track all sources of income, not just government benefits.
- Use a financial advisor to assess your income against the clawback threshold.
- Split pension income with your spouse to reduce taxable income.
- Reinvest dividends in TFSAs instead of non-registered accounts to lower taxable income.
- Consider systematic RRIF withdrawals rather than large lump sums.
Retirement is meant to be enjoyed, and with proper planning, it can be. But if you’re receiving OAS, don’t let overlooked income, missed tax slips, or unplanned withdrawals put your monthly payments at risk.
With travel, investments, and inflation all impacting your financial picture in 2025, it’s more important than ever to track your income carefully and stay proactive about CRA red flags.
Enjoy your summer plans and dividend growth — just make sure your financial freedom doesn’t come at the cost of your government benefits. A little awareness today can save you hundreds or even thousands in clawbacks or penalties tomorrow.
FAQs
What is the OAS clawback threshold for 2025?
The clawback begins at $90,997 in net income. Any amount above this is reduced by 15 cents per dollar.
Do RRSP withdrawals affect my OAS payments?
Yes. All RRSP withdrawals are counted as taxable income and can trigger OAS clawbacks.
How can I avoid missing tax slips for dividends?
Maintain a consolidated record of all accounts and regularly check CRA My Account for reported slips.