The Old Age Security (OAS) Recovery Tax — commonly called the “OAS clawback” — reduces the OAS pension of higher-income Canadian retirees. For 2026, OAS starts to be clawed back when your net income exceeds approximately $93,454. For every dollar above this threshold, 15 cents of OAS is repaid to the government. Planning your income in retirement to stay below — or minimize your exposure above — this threshold can preserve thousands of dollars per year in OAS payments.
Key takeaway: The OAS clawback is a 15% surtax on income above the threshold, in addition to regular income tax. If your net income is $120,000, approximately $3,982 of OAS is clawed back. TFSA withdrawals, pension income splitting, and RRSP drawdown timing are the main tools to reduce the impact.
OAS Clawback Thresholds — 2026
| Threshold | 2026 Amount |
|---|---|
| OAS recovery tax starts | ~$93,454 |
| OAS fully clawed back | ~$151,668 |
| Recovery tax rate | 15% of income above the threshold |
| Maximum OAS monthly benefit (65) | ~$727.67/month (2026 — indexed quarterly) |
| Maximum annual OAS clawback | ~$8,732 (full annual OAS at 65) |
Thresholds are adjusted annually by the CRA. Confirm at canada.ca before filing.
How the OAS Clawback Works
The CRA uses your line 23600 net income (T1 return) to calculate the OAS recovery tax.
Formula: $$ ext{OAS Recovery Tax} = 15% imes ( ext{Net Income} - ext{Threshold})$$
Examples:
| Net Income | Threshold | OAS Clawed Back | Monthly Reduction |
|---|---|---|---|
| $93,454 | $93,454 | $0 | $0 |
| $100,000 | $93,454 | $990 | $82.50/month |
| $110,000 | $93,454 | $2,482 | $206.83/month |
| $130,000 | $93,454 | $5,482 | $456.83/month |
| $151,668 | $93,454 | $8,732 | $727.67/month (fully clawed back) |
What Counts as Net Income for OAS?
The following types of income increase your net income (line 23600) and potentially trigger or increase the OAS clawback:
Included in net income:
- Employment or self-employment income
- CPP/QPP pension income
- RRSP withdrawals
- RRIF minimum withdrawals (mandatory after age 71)
- Rental income
- Investment income (dividends, capital gains — included at 50%)
- Foreign pension income
- Employment Insurance (EI)
NOT included in net income (does not affect OAS):
- TFSA withdrawals
- OAS payments themselves
- GIS (Guaranteed Income Supplement)
- Lottery winnings
- Inheritances
- Return of capital distributions
How the CRA Adjusts Your OAS Payments
The OAS recovery tax is collected in one of two ways:
-
Prior-year assessment: After you file your T1 return, the CRA calculates the OAS recovery tax based on the previous year’s income. If your income exceeded the threshold, your monthly OAS payments in the following July–June period are reduced proportionally.
-
Voluntary deferral: You can request the CRA deduct the recovery tax at source from your monthly OAS payments to avoid owing a large amount at tax time.
Strategies to Reduce the OAS Clawback
1. Pension Income Splitting
If you have a spouse or common-law partner, you can split eligible pension income (RRIF withdrawals, registered pension income, certain annuities). By shifting income to the lower-earning spouse, you can reduce your personal net income below or closer to the threshold.
Example: Your net income is $115,000; spouse’s is $50,000. Split $22,000 of pension income to your spouse → your net income drops to $93,000 — below the threshold. OAS clawback avoided.
2. Use TFSA in Retirement Instead of RRIF
TFSA withdrawals don’t count as income — they won’t push you above the OAS threshold. If you have substantial TFSA savings, drawing these down instead of RRIF withdrawals keeps your net income lower.
This is why building a large TFSA before retirement matters: Every dollar in a TFSA rather than an RRIF can be withdrawn in retirement without triggering OAS clawback.
3. RRSP Drawdown Strategy Before 65
If you retire early (55–64), drawing down your RRSP before age 65 reduces the RRIF minimum withdrawal amounts you’ll face after age 71 — the period when most OAS clawback occurs. Taking income in lower-tax years before OAS starts is a common income-levelling strategy.
4. Defer OAS to Age 70
You can defer OAS up to age 70, gaining a 7.2% permanent increase per year of deferral (maximum 36% at age 70). Deferring OAS to 70 can make sense if:
- Your income in your early 70s will be lower (after RRIF mandatory withdrawals ease off)
- You expect a long life and the total lifetime OAS is higher at age 70
- The clawback calculation would eliminate much of the early OAS anyway
However, deferring CPP and OAS simultaneously requires careful modelling — speak with a financial advisor if your income is near the threshold.
5. Crystallize Capital Gains Before 65
Large capital gains (from selling investments, a business, or a rental property) spike net income and can trigger or worsen the OAS clawback. If possible, realize large capital gains before age 65 (before OAS begins) when the clawback is not a factor.
Related Resources
- OAS and GIS Guide Canada — how OAS and GIS work
- CPP and OAS Combined Guide — maximising government retirement income
- TFSA Contribution Limit 2026 — building the TFSA for OAS protection
- RRIF Withdrawal Rules — minimum RRIF withdrawals and timing
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy