Tax Planning for Seniors: Gifting Shares, OAS Clawback and minimizing Tax on your Final Return

Year-end is the last practical window to shape your 2026 tax picture. For seniors, 2026 net income also sets how much Old Age Security (OAS) you keep from July 2027 to June 2028. The 15% recovery tax ("clawback") starts at net income of $95,323 for that period (up from $93,454 for the current one). Above that, you repay 15 cents of OAS for every dollar of excess income, on top of regular income tax.

Why a one-time gain hurts

Selling appreciated shares in a non-registered account puts half the gain (the capital gains inclusion rate remains 50%) into net income. A $100,000 gain adds $50,000 to income. If that pushes you over the threshold, you pay regular tax plus the 15% clawback on the same dollars. The OAS reduction is then spread over the following July–June payment year, so the cost shows up months later.

Gift in kind of publicly listed shares to a registered charity. The taxable capital gain is zero, and you receive a donation receipt for full fair market value. Donating the shares is generally cheaper than selling and donating the cash.

A caveat that surprises people: the donation credit does not reduce net income, and the clawback is based on net income. So an in-kind donation helps by keeping the gain out of income, not by deducting the gift. A cash donation does nothing for the clawback.

The final return

On death, you are generally deemed to have sold all capital property at fair market value, and RRSP/RRIF balances are fully taxable unless they roll to a spouse or other eligible beneficiary. The result can be a very large income spike in one year, taxed at top rates. Planning points:

• Spousal rollover defers the tax to the surviving spouse's death.

• Charitable gifts by will can be claimed up to 100% of net income in the year of death and the preceding year, versus 75% during life. Publicly listed securities donated in kind get the zero inclusion rate here too.

• Private company shares need specific planning (for example, post-mortem planning to avoid double tax on the corporation's value). This is not a do-it-yourself area.

• Lifetime Capital Gains Exemption ($1.25 million for qualifying small business and farm/fishing property) can be used before death. Qualification tests are strict.

  
  

Before you gift anything

1. Confirm your 2026 income against the $95,323 threshold before triggering gains.

2. Start early. In-kind transfers take days. Year-end cut-offs are real.

3. Consider control and risk. Gifts to children are irrevocable and expose the asset to their creditors and family-law claims.

4. Get your adjusted cost base records in order. The gain calculation depends on them.

   
   

Every situation differs, and provincial rates, surtaxes and family circumstances change the answer. Contact our office before year-end and we'll model your options.

This post is general information, not personalized tax advice. Rules and thresholds are current as of November 2026.