Does the OAS Clawback Apply If I Live in the US?

No. If you are a US resident, the OAS clawback does not apply to you. The clawback is a Canadian tax mechanism (the OAS recovery tax under Part I.2 of the Income Tax Act), and it only reaches OAS recipients who are taxable in Canada on their OAS benefits. Under Article XVIII(1) of the Canada-US tax treaty, social security benefits (which includes OAS) paid by Canada to a resident of the United States are taxable only in the United States. Canada cannot tax the OAS, so it cannot claw it back.

This is one of the most common misunderstandings among Canadians who retire in the US. They assume the clawback follows them, and they either avoid drawing OAS or make financial decisions based on a threshold that does not apply to them.

What is the OAS clawback?

The Old Age Security recovery tax, found in Part I.2 of the ITA (sections 180.2 and 180.3), reduces OAS payments for higher-income recipients. If your net income exceeds the threshold ($90,997 for 2025, adjusted annually), you repay 15 cents of OAS for every dollar of net income above the threshold. At roughly $148,000 of net income (the full repayment threshold, also adjusted annually), the entire OAS benefit is clawed back to zero.

The clawback is implemented through a tax on line 23500 of the T1 return. Service Canada also deducts it at source if your prior year’s return indicated you would owe it, reducing your monthly OAS payment before it reaches you.

For a Canadian resident with a high income (from RRIFs, CPP, pensions, investment income, or continued employment), the clawback can eliminate OAS entirely. This is why some Canadians delay OAS, split pension income, or structure withdrawals to stay below the threshold.

Why doesn’t it apply in the US?

Because the treaty removes Canada’s right to tax your OAS. Article XVIII(1) of the Canada-US tax treaty allocates exclusive taxing rights on social security benefits to the country of residence:

“Benefits paid under the social security legislation in a Contracting State (including tier I railroad retirement benefits but not including unemployment benefits) to a resident of the other Contracting State shall be taxable only in that other State.”

OAS is paid under Canada’s social security legislation. If you are a resident of the United States, the OAS is “taxable only in” the United States. Canada has no taxing right, so no Canadian income, so no net income for clawback purposes, so no clawback.

The withholding at source (the non-resident withholding tax under Part XIII of the ITA) does not apply either, because Article XVIII(1) overrides it. Service Canada should not withhold Canadian tax on OAS paid to a US resident who has provided a Canadian NR5 application (or equivalent) establishing their non-resident status and treaty claim.

How does the US tax OAS?

Article XVIII(5) of the treaty provides that social security benefits from one country, if they would be exempt from tax in the country paying them, are exempt in the country of residence to the extent of the benefit the paying country would have provided. In practice, this means the US includes only 85% of the OAS in income (the same percentage that applies to US Social Security benefits at higher income levels, under IRC 86).

The 85% inclusion rule applies regardless of your total income. There is no US version of the OAS clawback. Whether you have $50,000 or $500,000 of US income, the OAS is included at 85% and taxed at your marginal US rate. There is no phase-out, no repayment, no recovery tax.

The 15% that is excluded is excluded permanently. It is not income in either country.

What about CPP?

CPP (Canada Pension Plan) benefits paid to a US resident are treated the same way under Article XVIII(1): taxable only in the United States. The US includes 85% in income. No Canadian tax, no Canadian source deductions (once the treaty claim is established), and no interaction with the OAS clawback (since the clawback is based on Canadian net income, which does not include CPP for a US resident either).

The CPP/OAS in the US guide covers the US taxation mechanics in detail.

What if I move back to Canada?

The clawback reactivates. Once you become a Canadian tax resident again, your OAS is taxable in Canada, your worldwide income goes into the net income calculation, and the clawback applies if you are above the threshold. The treaty exemption works only while you are a resident of the US.

This matters for the timing of a return to Canada. If you are close to the clawback threshold in Canada, and you are currently exempt from it in the US, the move back increases your effective tax rate on OAS. The moving-back checklist covers this and other changes that come with re-establishing Canadian residency.

What should I do next?

If you are a US resident receiving OAS, confirm that Service Canada is not withholding Canadian tax. If they are, file an NR5 or contact Service Canada to establish your non-resident treaty status. If you are planning retirement and have the option of living in the US or Canada, calculate what the OAS clawback would cost you in Canada and compare it to the US tax on 85% of the benefit. The difference is one input into the retirement location decision.

• CPP and OAS received in the US: how are they taxed?, the US tax mechanics on both benefits
• How many days can a Canadian snowbird spend in the US?, because snowbirds who are not US residents do not get the exemption
• Moving back to Canada from the US: a tax checklist, what changes when the clawback reactivates

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.