OAS Clawback

The IRS treats OAS income in the same manner as CPP income: snowbird residents of the US will be taxed on only 85% of that income at US federal tax rates, which are typically lower than Canadian rates.

In addition, Canadians who retire in the US and collect OAS payments stateside benefit from being able to avoid the CRA’s OAS clawback rule. The rule is that if a Canadian resident’s earnings exceed a certain threshold amount in yearly income (from sources such as employment, investment, or even CPP income), the government can force the resident to pay back some of their OAS payments. Above a certain maximum threshold, the CRA can stop providing OAS payments entirely.

Since US residents’ OAS payments are not subject to the clawback, snowbird clients who move to the US can save money, particularly when they keep other cross-border financial planning opportunities at the front of their minds.