# OAS eligibilty question



## Mechanic (Oct 29, 2013)

Although we won't qualify for this till 2021, I was reading a little bit of information on it so I have an idea what to expect and plan for. My understanding is that as long as our personal income is less than approx $79k, we would get the full amount of approx $600/mth. We will have lived in Canada for 40 years. Is that treated on an individual basis ? i.e., can wife and I both have incomes of up to $79k and both still get the $600/mth, therby giving us a total of approx $1200/mth in addition to our CPP ?


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## OptsyEagle (Nov 29, 2009)

Yes.


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## Retiredguy (Jul 24, 2013)

Mechanic said:


> Although we won't qualify for this till 2021, I was reading a little bit of information on it so I have an idea what to expect and plan for. My understanding is that as long as our personal income is less than approx $79k, we would get the full amount of approx $600/mth. We will have lived in Canada for 40 years. Is that treated on an individual basis ? i.e., can wife and I both have incomes of up to $79k and both still get the $600/mth, therby giving us a total of approx $1200/mth in addition to our CPP ?


Not quite.

If you have personal income of 79K and then add OAS you will have some OAS clawed back. If you had personal income of 72.6 K (approx.) and then add the full annual OAS amount you will not have any claw back.

CPP is included in personal income. 

If using the above figures, you had 80K of income including OAS you would have $150 of the annual amount of OAS clawed back. OAS is clawed back at the rate of .15 for every dollar over the threshold. So 80K - 79K = 1K (1000 x .15 = 150).

Point is that the threshold you read about includes OAS. OAS is not on top of it.

Yes both you and your wife can have incomes up to (approx.) 72.6K plus full OAS and not have any clawback.

Hope this helps.


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## AltaRed (Jun 8, 2009)

And remember eligible dividend income needs to be grossed up as part of the ~$72.6k whereas cap gains is taxed at 50% of the actual amount of the gain (the 50% is calculated on Sch 3 before it goes over to Page 1 of the T1 return.


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## Longtimeago (Aug 8, 2018)

I agree with the above simply to give you more confidence in the answers.


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## ian (Jun 18, 2016)

You also have an option of deferring OAS until age 70.


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## Mechanic (Oct 29, 2013)

I realize it can be deferred but I will likely just get it when eligible. I took CPP 3 years early. I can adjust our incomes as needed and don't see needing $160k/yr as I don't spend anything like that now, so shouldn't have to worry about it. I just wasn't sure we would get it as a friend said there would be clawback but it says only 15c for every dollar over the limit anyway. I know I have a lot of dividend income, so will maybe mention it to the accountant when we review our taxes and incomes in a couple of months time. I certainly appreciate all the comments.


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## Retiredguy (Jul 24, 2013)

Mechanic said:


> I realize it can be deferred but I will likely just get it when eligible. I took CPP 3 years early. I can adjust our incomes as needed and don't see needing $160k/yr as I don't spend anything like that now, so shouldn't have to worry about it. I just wasn't sure we would get it as a friend said there would be clawback but it says only 15c for every dollar over the limit anyway. I know I have a lot of dividend income, so will maybe mention it to the accountant when we review our taxes and incomes in a couple of months time. I certainly appreciate all the comments.


Don't be concerned about eligible dividend income and the clawback. Yes eligible dividend income gets grossed up and increases the clawback but your net after tax amount will be greater because of the way dividends are taxed. This can be demonstrated as follows:

1). 72600 regular income + 7300 OAS = after tax net 63804 (Clawback is $127)

2). 60000 regular income + 12600 dividend income + 7300 OAS = after tax net income 66534 (Clawback is $845)

Source:

TaxTips.ca - income tax calculator, Prov: BC - Yr: 2020 Birth Year: 1955 or earlier


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## Eclectic12 (Oct 20, 2010)

Mechanic said:


> ... I just wasn't sure we would get it as a friend said there would be clawback but it says only 15c for every dollar over the limit anyway.


Well for 2020, the OAS clawback starts at just over $79K of income. Full clawback requires just over $128K.
https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/recovery-tax.html

If you look at the previous years numbers, you'll see that the min and max thresholds are increasing year by year.


Cheers


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## Seahawk (Jan 6, 2017)

If a person knows from the figures above that the OAS will be completely clawed back, is there any advantage or point to even applying for the benefit?


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## Mechanic (Oct 29, 2013)

Retiredguy said:


> Don't be concerned about eligible dividend income and the clawback. Yes eligible dividend income gets grossed up and increases the clawback but your net after tax amount will be greater because of the way dividends are taxed. This can be demonstrated as follows:
> 
> 1). 72600 regular income + 7300 OAS = after tax net 63804 (Clawback is $127)
> 
> ...


I will have to look at it more closely as our income is mostly dividends (approx 60k each last year) I think our only other income is CPP and some interest.


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## Retiredguy (Jul 24, 2013)

Mechanic said:


> I will have to look at it more closely as our income is mostly dividends (approx 60k each last year) I think our only other income is CPP and some interest.


Also something to be aware of regarding the delay of OAS to age 70 is that the ceiling for the clawback also rises because it takes longer to clawback the higher amount at .15 per $1.


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## Retiredguy (Jul 24, 2013)

Seahawk said:


> If a person knows from the figures above that the OAS will be completely clawed back, is there any advantage or point to even applying for the benefit?


Certainly don't consider applying, at least, until after age 70.
Here's a couple of ideas that I recently read about.

Below is a cut and paste of what I read. (Sorry I don't have Hector's last name.)

_A second OAS secret Hector calls an OAS “superceiling” of $209,110 that can be created for a single calendar year: a high-income person above the $143,000 income ceiling could arrange to receive two years of 36 per cent enhanced OAS payments — $19,730 — for that same year. This involves precise timing in making a retroactive lump sum application while also deferring benefits to beyond age 70. (Those older than 65 when they first apply for OAS can choose an effective starting date up to a year earlier than the current date of the application, with all payments based on the earlier date, with a lump sum paid retroactively for the period between the two.)

Thirdly, there is an estate planning tip that may permit even a wealthy individual with annual income of $250,000 or more to capture a single year of OAS — or more accurately, his or her estate would capture it. If the deceased never applied on their own for OAS, an executor can have the estate apply for benefits within one year of the date of death. While benefits always cease at death, this lets the estate “reach back” and obtain a lump sum payment for the year prior to the death date — this would be included on an optional tax filing called a “Rights or Things” tax return._


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