How Income Reduces Your GIS

1. Why does other income reduce GIS?

GIS is an income-tested benefit. This means the amount you receive depends on your income, or, for many couples, your combined income.

In general, GIS is reduced as other countable income rises. The Government of Canada describes the standard reduction as generally about $1 of GIS for every $2 of countable income.

However, there are exceptions.

One of the most important is the GIS earnings exemption for employment and self-employment income.

Old Age Security itself is not included as income when determining GIS.

The exact GIS calculation depends on your situation, including whether you are single, married or in a common-law relationship and whether your spouse or partner receives OAS or the Allowance.

2. The GIS earnings exemption

If you receive GIS and earn money from employment or self-employment, special rules protect some of those earnings from the GIS calculation.

Under the current federal rules:

• The first $5,000 of annual employment or self-employment earnings is fully exempt.
• For earnings between $5,000 and $15,000, 50% is exempt.
• Once employment or self-employment earnings are above $15,000, there is no additional earnings exemption on the amount above $15,000.

This means that someone earning $15,000 from work does not have the full $15,000 included in the GIS income calculation.

How much employment income is counted?

*Simplified illustration of the earnings exemption only. Other GIS rules may affect the final calculation.

At $15,000 of qualifying earnings:

1. The first $5,000 is ignored.
2. Of the next $10,000, half is ignored.
3. Only $5,000 remains to enter the GIS income calculation.

This is much more favourable than having the entire $15,000 treated as countable income.

3. What could that mean for your GIS?

For many GIS recipients, an increase in countable income reduces GIS by approximately 50 cents for each additional dollar of countable income.

Using that general rule gives the following simplified examples:

*These figures are illustrations, not a Service Canada benefit calculation. Actual GIS reductions depend on your marital/family situation, combined income and the applicable GIS payment table.

Example: earning $15,000 from work

Suppose Mary receives GIS and earns $15,000 from a part-time job.

Without the earnings exemption, $15,000 of income could potentially enter the GIS calculation.

With the exemption:

• First $5,000: ignored
• Next $10,000: 50% ignored
• Amount remaining: $5,000

Using the general 50% GIS reduction as an illustration, $5,000 of countable income could mean roughly $2,500 less GIS for the year, rather than approximately $7,500 if all $15,000 were countable.

The actual amount must be determined using the GIS rules that apply to Mary's circumstances.

4. Employment income and income tax are two different calculations

The GIS earnings exemption is not an income-tax exemption.

If you earn $15,000 from employment, the GIS calculation may treat only part of that income as countable because of the GIS earnings exemption.

For income-tax purposes, however, your employment income is still reported on your tax return.

Whether you actually owe federal or Ontario income tax depends on your:

• total taxable income;
• deductions;
• federal and Ontario non-refundable tax credits;
• taxes already withheld; and
• personal circumstances.

So remember:

The GIS earnings exemption can protect part of your employment income from reducing GIS, but it does not make the employment income tax-free.

5. CPP income

Canada Pension Plan (CPP) retirement benefits do not receive the GIS employment earnings exemption.

CPP income is generally included when Service Canada determines income for GIS purposes.

This can make CPP particularly important for a low-income senior receiving GIS.

Simple illustration

If you receive an additional $1,000 of CPP income, that $1,000 does not get the special $5,000 employment exemption.

For someone subject to an approximately 50% GIS reduction rate, $1,000 of additional countable income could reduce annual GIS by roughly $500.

This is only an illustration. The actual effect depends on your GIS category and household circumstances.

6. Workplace pension income

Income from an employer or workplace pension generally counts as income for GIS purposes.

It does not qualify for the special GIS earnings exemption simply because the pension came from your former employment.

A pension received after retirement is different from wages earned by currently working.

For a GIS recipient, this means a workplace pension can have two effects:

1. it may be taxable for income-tax purposes; and
2. it may reduce GIS.

7. RRSP and RRIF withdrawals

Withdrawals from a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) are generally taxable income and can also affect GIS.

They do not qualify for the employment earnings exemption.

This can create a significant planning issue for someone receiving GIS.

Example

Suppose a GIS recipient withdraws $10,000 from an RRSP.

The withdrawal is generally included in taxable income. It can therefore also increase the income used to determine GIS.

If the full $10,000 is countable for GIS and the person's applicable GIS reduction is approximately 50%, the withdrawal could potentially be associated with roughly $5,000 less GIS, in addition to any income tax consequences.

The exact result depends on the person's circumstances and applicable GIS calculation.

Planning point: Before making a large RRSP or RRIF withdrawal while receiving GIS, consider both the income tax and the possible GIS reduction. Looking only at the tax withheld on the withdrawal can seriously understate the real cost.

8. TFSA withdrawals are different

A Tax-Free Savings Account (TFSA) is particularly important for people receiving income-tested federal benefits.

Income earned inside a TFSA and withdrawals from a TFSA do not affect GIS.

They also do not have to be included as taxable income on your income tax return.

Example

Suppose you need $10,000 for a major expense.

If you withdraw $10,000 from an RRSP, the withdrawal is generally taxable and may reduce your future GIS.

If you withdraw $10,000 from a TFSA, the withdrawal itself:

• is not taxable; and
• does not affect your GIS.

This does not mean that everyone should automatically use a TFSA before an RRSP or RRIF. Retirement withdrawal planning depends on many factors. But for someone receiving GIS, the difference can be substantial.

9. Quick comparison

This table is a general guide. Special tax and benefit rules can apply in individual situations.

10. When does an income change affect your GIS?

GIS normally operates on a July-to-June payment cycle.

Your GIS amount is generally recalculated each July using your income from the previous calendar year.

For example:

• income earned during 2025 normally affects the GIS payment period beginning in July 2026;
• income earned during 2026 would normally affect the payment period beginning in July 2027.

This delay is important.

You might make a large RRSP withdrawal today and see no immediate change in your GIS payment. The effect can appear later when Service Canada recalculates your benefit.

There are also situations where Service Canada can use an estimate of current-year income, particularly when income has fallen because of retirement or certain other changes. Contact Service Canada if your income has changed substantially rather than assuming the previous-year amount must always be used.

11. Why filing a tax return matters

Service Canada normally obtains the income information used to renew GIS from your income tax return.

That means you should file a tax return every year, even if you have little income or believe you owe no tax.

If Service Canada does not receive the necessary income information, your GIS payment can be reduced or stopped until your eligibility is confirmed.

No tax payable does not mean no tax return is needed.
For a GIS recipient, filing every year helps keep benefits up to date.

12. Common GIS planning traps

Trap 1 — Assuming all income is treated the same

It isn't.

Employment earnings receive a special exemption. CPP and RRSP/RRIF withdrawals generally do not. TFSA withdrawals do not affect GIS.

Trap 2 — Looking only at income tax

A withdrawal may result in modest income tax but still cause a significant reduction in GIS.

For a low-income senior, the combined effect of tax plus lost GIS may matter more than the tax rate alone.

Trap 3 — Taking a large RRSP withdrawal without considering next year's GIS

Because GIS is normally recalculated each July using the previous year's income, the financial impact of an RRSP/RRIF withdrawal can show up months later.

Trap 4 — Assuming withholding tax is the total cost of an RRSP withdrawal

Withholding tax is simply tax paid in advance. It does not measure the effect that the withdrawal may have on GIS or other income-tested benefits.

Trap 5 — Ignoring the value of TFSA flexibility

For someone receiving GIS, TFSA funds can be especially useful because withdrawals do not increase taxable income or reduce GIS.

13. A simple way to think about it

Before taking money from any source, ask two separate questions:

Question 1: Will I pay income tax on it?

Question 2: Will it increase the income Service Canada uses to calculate my GIS?

Those two answers are not always the same.

For example:

That distinction is one of the most important concepts for low-income retirement planning.

Bottom line

If you receive GIS, the source of your income matters.

The federal government gives employment and self-employment earnings special treatment:

• first $5,000: fully exempt;
• next $10,000: 50% exempt.

CPP, workplace pension income and RRSP/RRIF withdrawals generally do not receive that employment earnings exemption.

TFSA income and withdrawals do not affect GIS.

Before making a large withdrawal or changing your retirement income, consider the effect on both taxes and GIS.

Official sources

1. Government of Canada — Sources of income during retirement: GIS earnings exemption
   https://www.canada.ca/en/services/life-events/retirement/sources-income.html
2. Government of Canada — Canada Pension Plan and Old Age Security statistics, 2026
   Confirms that GIS income cut-offs exclude OAS, the first $5,000 of employment or self-employment income, and 50% of employment or self-employment income between $5,000 and $15,000.
   https://www.canada.ca/en/employment-social-development/programs/pensions/pension/statistics/2026-quarterly-april-june.html
3. Government of Canada — Guaranteed Income Supplement: Overview
   GIS is a monthly, tax-free benefit for eligible low-income OAS recipients.
   https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/guaranteed-income-supplement.html
4. Government of Canada — Old Age Security payment amounts
   Explains that GIS is generally recalculated each July using net income from the previous calendar year.
   https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/payments.html
5. Canada Revenue Agency — What is a TFSA?
   Confirms that TFSA income and withdrawals do not affect GIS or other federal income-tested benefits and credits.
   https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/what.html
6. Government of Canada — Guaranteed Income Supplement: How much you could receive
   Current GIS benefit information and benefit estimator.
   https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/guaranteed-income-supplement/benefit-amount.html

Important

This guide provides general educational information for Ontario retirees. GIS calculations can vary depending on marital status, your spouse or common-law partner's income and benefit status, and other circumstances.

The examples above are simplified illustrations and are not official Service Canada benefit calculations.

For your actual GIS entitlement, use the Government of Canada's Old Age Security Benefits Estimator or contact Service Canada.

RetireON.ca
Clear retirement planning for Ontarians.

Guide reviewed against Government of Canada sources: August 2026.