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OAS Clawback: Understanding the Old Age Security Recovery Tax

Mark Briggs by Mark Briggs - March 2025 | Updated September 2026

If you are approaching retirement in Canada, you may have heard about the OAS clawback. The official name is the Old Age Security (OAS) recovery tax, and it can reduce or eliminate part of your OAS pension if your income is high enough.

For many retirees, OAS is an important part of their retirement income. Understanding how the recovery tax works can help you make better decisions about when to withdraw money from RRSPs and RRIFs, when to realize investment gains, how to use TFSAs, and how to structure income between spouses.

The rules are based on your income, not simply on how much OAS you receive. And because the thresholds change over time, it is important to use current numbers when doing retirement planning.

What Is the OAS Clawback?

The OAS clawback is commonly used to describe the Old Age Security recovery tax.

If your income is above the applicable annual threshold, you are required to repay some of your OAS. The repayment is calculated at 15% of the amount of income above the threshold, subject to the maximum amount of OAS you received.

In other words, earning $1 more than the threshold does not cause you to suddenly lose all of your OAS. Instead, the recovery tax gradually reduces your benefit as income increases.

What Is the OAS Clawback Threshold in 2026?

This is where OAS planning can become confusing because the government refers to both an income year and a recovery period.

For the 2025 income year, the OAS recovery threshold is $93,454. This income is used to determine the OAS recovery tax for the period from July 2026 through June 2027.

For the 2026 income year, the threshold is $95,323. That figure will be used for the OAS recovery period from July 2027 through June 2028.

The government currently lists the upper income levels for the 2026 income year as estimated at $155,109 for people age 65 to 74 and $161,088 for people age 75 and older. These upper figures are estimates until the final amounts are established.

The important point is that the OAS clawback does not have one permanent income limit. The threshold is adjusted over time.

2026 OAS Recovery Tax Thresholds

Income Year OAS Recovery Period Recovery Threshold Upper Threshold, Age 65–74 Upper Threshold, Age 75+
2025 July 2026 – June 2027 $93,454 $152,062 $157,923
2026 July 2027 – June 2028 $95,323 $155,109* $161,088*

*The upper thresholds for the 2026 income year are currently estimates published by the Government of Canada and may be finalized later.

These numbers are useful for planning, but your actual OAS recovery tax depends on your personal income and circumstances.

How Is the OAS Clawback Calculated?

The calculation is relatively straightforward.

If your income is above the applicable threshold, the recovery tax is generally calculated as:

Income above the threshold × 15% = OAS recovery tax

For example, suppose your applicable threshold is $93,454 and your income for the year is $100,000.

The amount above the threshold would be:

$100,000 − $93,454 = $6,546

The estimated recovery tax would therefore be:

$6,546 × 15% = $981.90

This means approximately $981.90 of OAS would be repaid through the recovery tax calculation.

The actual calculation can be more complicated depending on your situation, so the example should be viewed as an illustration rather than a personal tax calculation.

When Does the OAS Clawback Start?

The OAS recovery tax starts once your applicable net income exceeds the threshold for the relevant income year.

For the 2025 income year, that threshold is $93,454.

For the 2026 income year, the threshold is $95,323.

The threshold is not a tax bracket in the traditional sense. Instead, it determines the point at which the OAS recovery calculation begins.

When Is OAS Completely Clawed Back?

Eventually, the recovery tax can become large enough to eliminate your entire OAS pension.

For the July 2026 to June 2027 recovery period, the maximum income levels are:

  • $152,062 for people age 65 to 74
  • $157,923 for people age 75 and older

At or above these levels, the recovery calculation can result in the repayment of the full OAS pension for the applicable period.

The higher threshold for people age 75 and older is important because maximum OAS payments are higher after age 75.

How Much Is OAS in 2026?

OAS payments are adjusted periodically for inflation.

For July through September 2026, the maximum monthly OAS pension is:

  • $751.97 per month for ages 65 to 74
  • $827.17 per month for age 75 and older

These are maximum amounts. Your actual OAS pension may be lower depending on factors such as your age and how many years you lived in Canada after age 18.

Someone receiving a partial OAS pension should not assume that the maximum amounts shown above apply to them.

Why Does OAS Increase at Age 75?

OAS includes a permanent 10% increase beginning the month after you turn 75.

This is one reason the OAS recovery thresholds have separate upper limits for people age 65 to 74 and people age 75 and older.

Can You Delay OAS?

Yes. You can choose to delay OAS after age 65, up to age 70.

For every month you delay OAS after age 65, your monthly pension increases by 0.6%, up to a maximum increase of 36% at age 70.

For some retirees, delaying OAS can be part of a broader retirement-income strategy. However, delaying OAS is not automatically better for everyone. Your health, expected longevity, other income, tax situation and need for cash flow should all be considered.

What Income Counts Toward the OAS Clawback?

The OAS recovery calculation is based on a measure of income used by the government rather than simply your employment income.

Retirement income that may affect the calculation can include:

  • Employment income
  • Self-employment income
  • CPP benefits
  • RRSP withdrawals
  • RRIF withdrawals
  • Pension income
  • Investment income
  • Interest income
  • Taxable dividends
  • Capital gains
  • Rental and business income

There are also deductions and adjustments that can affect the calculation. This is why simply looking at your gross cash flow is not enough to determine whether you will face an OAS recovery tax.

RRSP and RRIF Withdrawals Can Trigger OAS Clawback

One of the most important retirement-planning issues is the relationship between registered retirement accounts and OAS.

RRSP withdrawals are generally taxable income. Once an RRSP is converted to a RRIF, mandatory minimum withdrawals eventually become part of your taxable income as well.

This can create an income spike in retirement.

For example, imagine someone receives:

  • $40,000 from CPP, pensions and other income
  • $30,000 from a RRIF
  • $25,000 from other taxable investment income

That person could have significantly more taxable income than expected, potentially pushing them into OAS recovery-tax territory.

This is one reason retirement planning should consider the timing of registered-account withdrawals rather than waiting until mandatory RRIF withdrawals become large.

Can You Reduce the OAS Clawback?

You generally cannot simply opt out of the OAS recovery tax. However, retirement-income planning can sometimes reduce the income that is subject to the calculation.

Some strategies to consider include:

1. Draw Down RRSPs Before They Become RRIFs

Some retirees choose to make planned RRSP withdrawals during lower-income years before mandatory RRIF withdrawals become significant.

This may create additional tax today, but it can potentially reduce future taxable income and future OAS recovery tax.

The right decision depends on your overall marginal tax rate and retirement income projections.

2. Consider Pension Income Splitting

Eligible pension income may be split between spouses or common-law partners for tax purposes.

Income splitting can sometimes help distribute taxable retirement income more evenly between spouses.

Whether it helps with OAS recovery depends on the specific income sources, ages and tax situation involved.

3. Use Your TFSA Strategically

TFSA withdrawals are generally not included in taxable income.

That makes the TFSA a particularly useful retirement-income source when managing taxable income.

For example, someone who needs $10,000 for a major purchase could potentially take the money from a TFSA rather than making an additional taxable RRIF withdrawal.

This does not mean you should always use your TFSA first. It means that the tax characteristics of each account should be considered as part of an overall retirement-income plan.

4. Manage the Timing of Capital Gains

Large investment gains realized in a single year can increase your income and potentially affect OAS recovery tax.

Investors may therefore want to consider the timing of taxable investment sales rather than automatically realizing large gains in one year.

Investment decisions should not be made solely to avoid OAS recovery tax. Taxes are only one part of the overall investment decision.

5. Consider Spousal RRSP Planning

A spousal RRSP can sometimes help couples balance retirement income between spouses.

However, attribution rules can apply to withdrawals, particularly when contributions have been made recently. Anyone considering this strategy should understand the applicable rules before making withdrawals.

6. Plan for Large One-Time Income Events

Selling an investment property, realizing a large capital gain, exercising certain stock options or receiving other substantial income can affect your OAS recovery tax.

If you know a large taxable event is coming, it can be worthwhile to model its effect on your entire retirement plan rather than looking only at the tax on the transaction itself.

Does Moving to a Lower-Tax Province Avoid the OAS Clawback?

No. Moving to a province with a lower provincial income-tax rate does not automatically eliminate the OAS recovery tax.

The OAS recovery tax is based on federal rules and the applicable income calculation. Provincial income-tax rates are a separate issue.

Provincial tax planning can still be important in retirement, but it should not be confused with the federal OAS recovery calculation.

What About OAS and Your Spouse?

OAS is an individual benefit. Your spouse's income does not simply get combined with yours to determine whether your OAS is clawed back.

Each person's OAS recovery tax is based on their applicable income.

However, couples can still use retirement-income planning techniques such as pension income splitting and coordinated withdrawals to manage the distribution of taxable income between spouses.

Does OAS Have a Survivor Benefit?

OAS does not work like a traditional employer pension with a standard spousal survivor pension.

When one spouse dies, their OAS pension does not simply continue to the surviving spouse.

The surviving spouse may, however, qualify for other government benefits depending on their age, income and circumstances, including the Allowance for the Survivor in qualifying situations.

What About GIS?

The Guaranteed Income Supplement (GIS) is designed to provide additional income to eligible low-income OAS recipients.

GIS is different from the OAS recovery tax. In fact, GIS eligibility is generally associated with much lower income levels than the OAS clawback threshold.

Therefore, someone planning retirement income should consider both OAS and GIS rules where applicable.

Should You Worry About the OAS Clawback?

If your retirement income is comfortably below the OAS threshold, the recovery tax may not be an important planning issue.

But if your retirement income is likely to fluctuate around or above the threshold, it is worth incorporating the recovery tax into your retirement projections.

The biggest mistake is often treating OAS as an isolated benefit.

Instead, consider how OAS interacts with:

  • CPP
  • RRSP withdrawals
  • RRIF minimum withdrawals
  • Employer pensions
  • TFSA withdrawals
  • Investment income
  • Capital gains
  • Pension income splitting
  • Provincial and federal income taxes
  • GIS eligibility

OAS Clawback Example

Let's say a retiree has income of $120,000 during the 2025 income year.

The 2025 OAS recovery threshold is $93,454.

The amount above the threshold is:

$120,000 − $93,454 = $26,546

Applying the 15% recovery rate gives:

$26,546 × 15% = $3,981.90

The retiree would therefore have an estimated OAS recovery tax of $3,981.90 for the applicable recovery period, subject to the detailed calculation and the amount of OAS actually received.

This example demonstrates why a relatively small increase in taxable retirement income can have an effect beyond ordinary income tax.

OAS Clawback Is Not a Penalty

It is common to hear people describe the OAS recovery tax as a penalty. Technically, it is better understood as a recovery mechanism built into the OAS program.

OAS is a government benefit that is available to eligible Canadians, but higher-income recipients are required to repay some or all of the benefit when their income exceeds the applicable thresholds.

Thinking of it as a recovery tax rather than a penalty can make retirement planning decisions easier to evaluate objectively.

How Retirementize Can Help

OAS clawback planning is one reason retirement planning should look at your retirement income over many years rather than focusing on a single year's income.

Retirementize can help you model different retirement scenarios and see how changes to income, withdrawals, pensions, investments and spending can affect your overall retirement plan.

Instead of asking only, "How much money do I need to retire?", consider asking:

  • When should I start CPP?
  • When should I start OAS?
  • How quickly should I draw down my RRSP?
  • How will RRIF withdrawals affect my taxes?
  • How much should I keep in my TFSA?
  • How can I manage taxable income between spouses?
  • Will my retirement income trigger OAS recovery tax?

These questions are connected. A good retirement plan considers them together.

Fun Facts About OAS

  • OAS can begin as early as age 65.
  • You can voluntarily delay OAS until age 70.
  • Delaying OAS increases the monthly pension by 0.6% for every month after age 65, up to 36% at age 70.
  • OAS payments are adjusted periodically for inflation.
  • OAS is not based on your employment history in the same way CPP is.
  • A full OAS pension generally requires 40 years of Canadian residence after age 18, although partial pensions may be available.
  • The maximum OAS pension automatically increases by 10% after you turn 75.
  • The OAS recovery tax is commonly called the "OAS clawback," although the government uses the term "recovery tax."

Final Thoughts

The OAS clawback can be an important consideration for higher-income retirees, but it should not be viewed in isolation.

For the 2025 income year, the OAS recovery threshold is $93,454. For the 2026 income year, the threshold increases to $95,323. The applicable recovery period begins the following July.

For retirees approaching these income levels, decisions about RRSP withdrawals, RRIF income, capital gains, pension income splitting, TFSA withdrawals and the timing of OAS can all affect the overall retirement picture.

The goal is not necessarily to avoid every dollar of OAS recovery tax. Sometimes paying additional tax is the result of having significantly more income, which can still leave you financially better off.

The real goal is to build a retirement-income strategy that balances taxes, government benefits, investment growth, spending needs and longevity.