Quick answer: The OAS clawback is calculated against net world income on line 23400 of your T1 return. It includes employment, self-employment, pension, RRIF and RRSP withdrawals, interest, taxable dividends (grossed up), the taxable portion of capital gains, rental income, and the OAS pension itself. It does not include TFSA withdrawals, GIS payments, the non-taxable portion of capital gains, or the proceeds of a principal residence sale that is fully exempt.
What this means: Anything that lands on line 23400 contributes to the 15% recovery tax once total net world income passes the threshold ($93,454 for 2025 income, $95,323 for 2026 income). Sources that do not appear on your T1 at all (like TFSA withdrawals) cannot trigger the clawback.
What to do next: Run your income through the calculator to see the recovery tax. Open the OAS clawback calculator →
Net world income and line 23400
The OAS recovery tax test starts from line 23400 of the T1 return: net income before adjustments. That figure equals your total income from all sources worldwide (line 15000) minus eligible deductions such as RRSP contributions, union dues, child care expenses, and carrying charges on investments. For OAS clawback purposes, CRA makes a small additional adjustment on the Federal Worksheet that removes the universal child care benefit and RDSP income from the test, then computes the recovery tax at line 23500 and reports it at line 42200.
In plain terms, if a dollar of income shows up on the T1 above the line, it counts toward the OAS clawback. If it never appears on the T1, it does not.
Which income types count and which do not
| Income type | Counts toward OAS clawback | How it flows into net income |
|---|---|---|
| CPP retirement pension | Yes | Reported on T4A(P); included in full at line 11400. |
| OAS pension | Yes | Reported on T4A(OAS); included at line 11300 even though the recovery tax itself is deducted later at line 23500. |
| RRIF withdrawals | Yes | Reported on T4RIF at line 11500. Both the minimum and any excess withdrawals count. |
| RRSP withdrawals | Yes | Reported on T4RSP at line 12900. The full withdrawal amount counts, not the net of withholding tax. |
| Workplace pension (DB or DC) | Yes | Reported on T4A or T4 at line 11500. Eligible for pension splitting once you are 65 or older. |
| Employment income | Yes | Reported on T4 at line 10100. |
| Self-employment income | Yes | Net business or professional income at lines 13500 to 14300, after deducting business expenses. |
| Rental income | Yes, net of expenses | Reported at line 12600 after deducting allowable rental expenses. |
| Eligible dividends (Canadian) | Yes, at the grossed-up amount | Cash dividend × 138% at line 12000. A $10,000 dividend becomes $13,800 of clawback-relevant income. |
| Non-eligible dividends (Canadian) | Yes, at the grossed-up amount | Cash dividend × 115% at line 12000. |
| Interest income | Yes | Full amount at line 12100. |
| Taxable capital gains | Yes | Half of the realized gain (current 50% inclusion rate) at line 12700, after offsetting capital losses. |
| Foreign pensions | Yes | Converted to Canadian dollars and included at line 11500, less any treaty exemption. |
| TFSA withdrawals | No | TFSA withdrawals are not reported on the T1 at all. |
| Principal residence sale (fully exempt) | No | Reported on Schedule 3 with a nil taxable capital gain after the principal residence exemption is applied. |
| Guaranteed Income Supplement (GIS) | No | GIS is not taxable and is excluded from net income. |
| Return of capital from non-registered investments | No | Reduces adjusted cost base instead of being taxed; not in net income until the position is sold. |
| Loans from a HELOC or reverse mortgage | No | Borrowed funds are not income. |
| Lottery winnings or gifts | No | Not taxable in Canada under the Income Tax Act. |
Why TFSA withdrawals do not count
A TFSA is a registered account whose earnings are tax-exempt. Contributions are made with after-tax dollars and withdrawals are not reported on the T1 return. Because the OAS clawback test starts from line 23400, and TFSA withdrawals never appear above line 23400, they cannot trigger the recovery tax.
For retirees who are near the OAS threshold, this makes the TFSA the most useful account to draw from in a year when an RRIF withdrawal or capital gain would otherwise push net world income above $93,454 (2025 income) or $95,323 (2026 income). See TFSA vs RRSP: which account to use for the broader trade-offs.
Why taxable capital gains count, but only at the inclusion rate
Capital gains are only partially included in income. Under the current 50% inclusion rate, half of a realized capital gain is added to net income at line 12700; the other half is non-taxable and does not count toward the OAS clawback. A $40,000 gain on a non-registered stock sale adds $20,000 to net world income, not $40,000.
The taxable half still counts as net income, so a large gain can push a retiree over the OAS threshold even if it represents a one-time event. Capital loss carryforwards and current-year losses reduce the taxable gain dollar for dollar. Donations of publicly traded securities in-kind to a registered charity eliminate the capital gain entirely under section 38(a.1) of the Income Tax Act. See donating stocks to charity in Canada for the in-kind mechanics.
Examples
Example 1: dividends pushing income over the threshold
Brenda is 68 and lives in Ontario. She receives $9,000 of OAS, $14,500 of CPP, and $25,000 of RRIF withdrawals in 2025. Her non-registered portfolio paid $30,000 of eligible Canadian dividends in cash. The dividends are reported at the grossed-up amount of $30,000 × 138% = $41,400. Her net world income for 2025 is approximately $9,000 + $14,500 + $25,000 + $41,400 = $89,900, just under the $93,454 threshold. No recovery tax applies.
If the cash dividend grows to $35,000 the following year (reported as $48,300 grossed up), her income climbs to roughly $96,800, which is $3,346 over the threshold. The recovery tax is 15% × $3,346 = $501.90, collected through monthly OAS reductions from July 2026 to June 2027.
Example 2: a one-time capital gain on a non-registered account
Pat is 70 and has $80,000 of pension and CPP income in 2026, plus $7,800 of OAS. He sells $60,000 worth of stock with a $30,000 capital gain. The taxable portion is $15,000 (50% of $30,000), included at line 12700. His net world income for 2026 becomes approximately $80,000 + $7,800 + $15,000 = $102,800, which is $7,477 over the $95,323 threshold. The recovery tax is 15% × $7,477 = $1,121.55. He could have spread the sale across two years to keep each year below the threshold.
Example 3: drawing from a TFSA instead of an RRIF
Lin is 73 with $85,000 of pension and CPP income and $7,000 of OAS. She needs an extra $15,000 for a roof repair. Drawing the $15,000 from her RRIF would push her net world income to $107,000, well above the $93,454 threshold, and add $2,032 of recovery tax. Drawing the same $15,000 from her TFSA leaves her T1 income at $92,000, just below the threshold. No recovery tax applies.
Adjustments and deductions that reduce net world income
A few deductions land below the income lines but above line 23400, so they reduce the clawback test directly:
- RRSP contributions made for the year (or the first 60 days of the following year), up to your contribution room.
- Carrying charges on investment loans and investment counsel fees.
- Union and professional dues.
- Pension income splitting with a spouse, electing on Form T1032. Up to 50% of eligible pension income can be moved to a lower-income spouse, reducing the higher-earner’s net income.
- Capital loss harvesting in non-registered accounts.
RRSP contributions are restricted by age. You cannot contribute to your own RRSP after December 31 of the year you turn 71. A spousal RRSP can still receive contributions until the spouse turns 71, provided you have RRSP room.
Common mistakes
- Confusing total income with net world income. The OAS test uses line 23400, which is after deductions. RRSP contributions, pension splitting, and carrying charges reduce the figure that drives the clawback.
- Treating cash dividends as the income amount. Eligible dividends are reported at 138% of cash, non-eligible at 115%. The gross-up is what counts for OAS purposes, not the cash you received.
- Assuming RRIF minimums always trigger clawback. The minimum withdrawal at age 71 is 5.28% of the prior-year-end balance. A $1,000,000 RRIF generates a $52,800 minimum, which is well below the threshold on its own. The clawback risk comes from combining the minimum with other income sources.
- Forgetting that OAS itself counts. OAS payments are part of net income. A full annual OAS of about $8,916 (for ages 65 to 74 in 2026) contributes directly to the threshold test.
- Ignoring pension splitting. A couple where one spouse has $110,000 and the other has $40,000 of eligible pension income can split to roughly $75,000 each, eliminating the higher-earner’s clawback entirely.
Frequently asked questions
Do capital gains count toward the OAS clawback?
Yes, but only the taxable portion. Under the current 50% inclusion rate, half of a realized capital gain is included in net world income at line 12700.
Do RRIF withdrawals count toward the OAS clawback?
Yes. RRIF withdrawals are fully included in net income at line 11500, including the annual minimum amount.
Do TFSA withdrawals affect the OAS clawback?
No. TFSA withdrawals are not reported on the T1 return and have no impact on net world income or the recovery tax.
Does selling my home affect the OAS clawback?
Not if the property qualifies for the full principal residence exemption. The sale is reported on Schedule 3 with a nil taxable capital gain. A non-exempt portion (for example, years the property was a rental) would generate a taxable capital gain that does count.
Are CPP and OAS treated the same for the clawback?
Both count toward net world income, but the recovery tax itself only reduces OAS. CPP is not clawed back.
Does GIS count?
No. The Guaranteed Income Supplement is not taxable and is excluded from net income.
What is line 23400?
Line 23400 is net income before adjustments on the T1 return: total income from all sources worldwide minus eligible deductions such as RRSP contributions and union dues. CRA uses an adjusted version of this figure (via the Federal Worksheet) to calculate the OAS recovery tax at line 23500.