OAS Clawback 2026: The $95,323 Threshold, the 15% Recovery Tax, and How to Plan Around It

The 2026 OAS Clawback Thresholds

The OAS clawback threshold is indexed each calendar year. For the 2026 tax year, the threshold is $95,323 of individual net income (line 23400 of the T1 less certain deductions, reported as line 23500). The recovery rate is 15% on every dollar above that amount, calculated and reported on the T1 return.

The annual base OAS payment depends on your age. For seniors aged 65 to 74, the maximum monthly OAS in 2026 is approximately $742.31, or about $8,907.72 per year. For seniors aged 75 and older, an automatic 10% top-up applies, bringing the maximum monthly OAS to approximately $816.54, or about $9,798.48 per year. These figures are indexed quarterly to the Consumer Price Index, so the precise monthly amount may shift slightly through the year.

Because clawback is 15 cents per dollar, full repayment of OAS happens at:

• Age 65 to 74: $95,323 + ($8,907.72 / 0.15) = approximately $154,708 of net income.
• Age 75 and over: $95,323 + ($9,798.48 / 0.15) = approximately $160,646 of net income.

Above those ceilings, the recovery tax wipes out the full OAS pension for the year.

How the 15% Recovery Tax Actually Works

The recovery tax is not a separate withholding at source on every OAS cheque. It is reconciled on the T1 return. When you file, the CRA compares your worldwide net income (line 23400 with adjustments) against the threshold and calculates the repayment. The amount is added to your tax payable on the return.

If your prior tax return showed an OAS repayment, Service Canada will withhold tax from your monthly OAS payments during the next payment period to pre-collect the expected clawback, so you do not face a large lump-sum tax bill at the end of the year. This is sometimes called the "OAS recovery tax" line on the T4A(OAS).

The clawback applies per individual, not per household. Each spouse has their own threshold. That is part of why pension-income splitting between spouses can be powerful: shifting taxable income from a higher-income spouse to a lower-income spouse can keep both below the threshold.

The July 2026 to June 2027 Payment Period

Service Canada operates OAS on a July-to-June payment period rather than a calendar year. The payment period running from July 2026 to June 2027 uses your 2025 calendar-year net income (the most recent T1 the CRA has on file). The threshold used for that period reflects 2025 indexation: approximately $93,454.

This is a frequent source of confusion. The amount withheld from a 2026 OAS cheque is based on 2025 income, not 2026 income. The clawback you actually owe for the 2026 calendar year is reconciled when you file your 2026 T1 in spring 2027. If your income drops in 2026 versus 2025, you may receive a refund of pre-collected recovery tax at filing time.

Strategies That Reduce Reportable Income

TFSA Withdrawals Do Not Count Toward the Clawback

Withdrawals from a Tax-Free Savings Account are not included in net income for OAS purposes. A retiree drawing $20,000 a year from a TFSA in addition to CPP, OAS, and a modest RRIF can keep their net income well below the threshold. Building TFSA assets before age 65 is one of the cleanest pre-OAS strategies. Our TFSA Calculator can model the contribution room you have available in 2026.

Pension Income Splitting at 65+

Once a Canadian reaches age 65, eligible pension income (including RRIF withdrawals, employer pension payments, and life annuities from registered sources) can be split up to 50/50 with a spouse on the T1. Many retired couples use form T1032 to elect a split that brings the higher-income spouse below the OAS threshold. This is independent of how the income was actually paid; it is a tax-return election only.

Charitable Donations

Charitable donations generate a non-refundable tax credit, not a deduction from net income, so the credit itself does not directly reduce the clawback. However, donating publicly-traded securities in-kind avoids the capital gain that would otherwise be added to net income, which can keep a retiree below the threshold in a high gain-realization year.

Smoothing RRIF Withdrawals

Once a RRIF is in pay, the minimum withdrawal is fixed by age and balance. Retirees with flexibility above the minimum often smooth withdrawals across multiple years rather than taking a single large draw, to avoid bumping over the clawback threshold in any one year. Our RRIF Calculator shows the minimum withdrawal schedule by age.

Deferring CPP to 70

Deferring CPP from 65 to 70 increases the monthly benefit by 0.7% per month, or 42% total. That higher CPP is reportable income and counts toward OAS, but the deferral allows a retiree to draw down RRSP or RRIF assets in the 65 to 70 window at lower tax rates, potentially shrinking the future RRIF minimum and the clawback exposure that would otherwise hit at 71+.

FHSA and TFSA-First for Higher Net Worth

Canadians with significant non-registered assets approaching retirement often prioritize TFSA contributions in their final working years and during the early retirement window before age 71. Each dollar in a TFSA is a dollar that, when withdrawn later, will not count toward the OAS clawback. Our OAS Clawback Calculator can show how a given income mix compares to the threshold.

Worked Example: A $110,000 Net Income Retiree

Consider a retiree aged 70 with $110,000 of individual net income for 2026, comprising CPP, employer pension, RRIF minimum, and modest non-registered investment income.

Excess over threshold: $110,000 - $95,323 = $14,677.

Recovery tax: 15% of $14,677 = $2,201.55 for the year.

Net OAS retained: $8,907.72 - $2,201.55 = $6,706.17 for the year, or about $558.85 per month.

Each additional dollar of net income above the threshold costs this retiree 15 cents of OAS on top of whatever marginal income tax applies. At a combined marginal tax rate of roughly 30%, the effective tax on each extra dollar of taxable income is closer to 45% (30 cents of regular tax plus 15 cents of OAS clawback). That is why many retirees in this band look hard at TFSA withdrawals or pension splitting before pulling extra income.

What Does Not Trigger the Clawback

Several common sources of retirement cash flow do not count toward OAS net income:

• TFSA withdrawals. Tax-free and not reportable on the T1.
• Return of capital from non-registered investments. The portion of a distribution from a corporate-class fund or REIT that is return of capital reduces the adjusted cost base of the investment rather than adding to income, so it does not feed the clawback (the gain shows up at eventual disposition).
• Principal residence sale. Capital gain on a qualifying principal residence is fully exempt and is not included in net income for OAS purposes. Reporting on Schedule 3 is still required.
• Inheritances and gifts. Receipts of inheritance or family gifts are not income in Canada.

For Canadians weighing a non-registered sale, the Capital Gains Tax Calculator shows the taxable portion (at the 50% inclusion rate; the proposed two-thirds rate was cancelled in March 2025) so the income impact on OAS is visible before pulling the trigger.

GIS Interaction for Lower-Income Seniors

The Guaranteed Income Supplement (GIS) is a separate, income-tested benefit for low-income seniors who already receive OAS. GIS is reduced as income rises, with phase-out rates that vary by family situation, and GIS eligibility ends well below the OAS clawback threshold. For seniors near the GIS phase-out band, the marginal effective tax rates on RRSP and RRIF withdrawals can be very high, sometimes exceeding 75% when combined with provincial supplements. Pre-retirement TFSA building is especially valuable at this income level.

FAQ

What is the 2026 OAS clawback threshold?

For the 2026 calendar year, the clawback threshold is $95,323 of individual net income. The recovery rate is 15% on every dollar above that amount.

At what income do I lose all my OAS in 2026?

For seniors aged 65 to 74, OAS is fully clawed back at approximately $154,708 of net income. For seniors aged 75 and over, the ceiling rises to approximately $160,646 because the base OAS is 10% higher after 75.

Does the OAS clawback apply per individual or per couple?

Per individual. Each spouse has their own threshold, which is why pension-income splitting on the T1 can preserve OAS for one or both spouses.

Are TFSA withdrawals included in OAS net income?

No. TFSA withdrawals are tax-free and do not appear on the T1, so they do not feed the OAS recovery tax. This is the single biggest reason TFSAs are powerful for retirees with OAS exposure.

Why did Service Canada start withholding tax from my OAS cheque?

If your prior year's T1 showed a recovery tax owing, Service Canada pre-collects an estimated amount from each monthly OAS payment during the next July-to-June payment period. This avoids a large balance due at filing time. The withholding is reconciled on your next T1.

Does CPP count toward the OAS clawback?

Yes. CPP retirement pension is included in net income and counts toward the threshold. Deferring CPP to 70 raises the eventual CPP amount and can increase clawback exposure in the late 70s and 80s, which is why CPP timing is usually modeled alongside RRIF withdrawals and OAS together.

Model Your OAS Clawback for 2026

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