OAS Recovery Tax (Clawback) Guide 2026

What Is the OAS Recovery Tax?

OAS recovery tax repays 15% of net world income above the income-year threshold, capped at actual OAS received. For 2026 income the threshold is $95,323; for 2025 income it is $93,454.

Do not confuse annual tax liability with monthly withholding. The income at which all OAS is recovered depends on actual pension payments, age, partial residence and deferral; it is not one universal ceiling.

How the Clawback Is Calculated

2026-income illustration: ($110,000 − $95,323) × 15% = $2,201.55, limited to actual annual OAS received. A separate withholding illustration uses 2025 income of $100,000: ($100,000 − $93,454) × 15% = $981.90 for July 2026–June 2027 withholding.

Income earned in 2026 informs July 2027–June 2028 withholding. Multiplying one quarterly monthly rate by 12 is an annualized scenario, not the actual calendar-year pension total.

Income That Counts Toward the Threshold

Use net world income before the OAS repayment deduction, including taxable OAS, CPP, pensions, RRSP/RRIF withdrawals, employment, rental and taxable investment income. TFSA withdrawals and GIS are excluded.

Do not reuse GIS assessable income: it excludes OAS and may include employment exemptions. Tax-return adjustments and international situations require professional review.

TFSA: The Most Powerful Clawback Shield

TFSA withdrawals are completely invisible to CRA — they don't appear on your T1 and don't affect your net income at all. A retiree with $300,000 in a TFSA can withdraw $20,000/year without triggering a single dollar of OAS clawback. This is why building TFSA room throughout your working years is one of the best OAS-protection strategies available to Canadians.

Pension Income Splitting to Reduce Clawback

Eligible pension income may be split subject to age and income-type rules. Compare both spouses' net world income with the correct year's threshold ($95,323 for 2026). Splitting can transfer recovery exposure rather than eliminate it.

CPP and OAS do not qualify for the same pension-income-splitting election; CPP sharing follows separate rules. Model the combined household result instead of assuming a guaranteed saving.

RRSP Meltdown Strategy

If you retire before 65 and expect high income after 65, consider withdrawing from your RRSP gradually between retirement and age 65. Keep annual income low (e.g., $50,000/year) during these years to fill lower tax brackets, reduce your eventual RRIF mandatory withdrawals, and protect OAS later.

This strategy can save $50,000–$150,000 in lifetime taxes for many Canadians. See our RRSP Meltdown Strategy guide for full details.

Should You Defer OAS to 70?

Deferring OAS from 65 to 70 increases your benefit by 36% (7.2% per year). If you expect to be above the clawback threshold at 65 but below it at 70 (e.g., once RRIF mandatory minimums push income up), deferral may not help.

However, deferral makes sense if: you're still working at 65, you're doing RRSP meltdown between 65–70, or your health suggests longevity. Use our OAS Calculator to compare scenarios.

Capital Gains Timing

Capital gains count toward your clawback threshold at 50% inclusion (pre-2026 assets). If you have a large capital gain to realize — from selling a cottage, rental property, or non-registered investments — consider spreading the gain over multiple years, using capital losses to offset gains, or realizing gains in years when other income is lower. A single large gain in one year can eliminate your entire OAS for that repayment period.