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By Jason Heath, CFP on June 17, 2025
Estimated reading time: 6 minutes

By Jason Heath, CFP on June 17, 2025
Estimated reading time: 6 minutes

Canadians accustomed to annual tax refunds may be surprised to owe tax in retirement and have government benefits clawed back. Here’s how to manage.

Every spring, I tend to have a lot of conversations with retirees who are disappointed that they owe tax on their tax return, that the Canada Revenue Agency (CRA) has asked them to pay income tax in installments, or that their Old Age Security (OAS) pension has been clawed back.

If it makes you feel any better, it is not just you—lots of retirees are in the same situation. Why does this happen, and what can you do about it?

When you are an employee, your employer must withhold payroll tax at source. If you have no other income, deductions or credits, in theory, you should have no tax owing nor a tax refund when you file your tax return in April.

In practice, most people have tax deductions that reduce their taxable income, or tax credits that reduce their tax owing. Both lead to tax refunds, and this is why most Canadian taxpayers get money back when filing tax returns during their working years.

In retirement, the situation is different. For one, taxpayers tend to have multiple streams of income. If you have a defined benefit pension, for example, the........

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