OAS Clawback Threshold and Recovery Tax (2026)

The Old Age Security clawback (formally the OAS recovery tax) reduces OAS payments when net world income exceeds an annual threshold. The 2024 income-year threshold is $90,997 (used for OAS payments July 2025 to June 2026). The 2025 threshold is $93,454 (affects July 2026 to June 2027 payments). The 2026 threshold is $95,323 (affects July 2027 to June 2028 payments). The recovery rate is 15% of every dollar of income above the threshold.

OAS clawback thresholds by income year

The threshold that applies to OAS clawback depends on the income year being filed, not the calendar year OAS is received. CRA uses the prior year’s net world income to determine the recovery tax for the upcoming benefit period (July through June). The table below uses figures published by the Government of Canada on the OAS pension recovery tax page.

The 2026 figures for the full-clawback ceilings are estimates based on maximum OAS pension amounts and are finalized in October of the current tax year. The minimum threshold is the indexed figure published in advance and does not change once announced.

How the recovery tax is calculated

The recovery tax is 15% of the difference between net world income and the threshold for the income year being filed. A retiree with 2025 net world income of $100,000 owes 15% of ($100,000 minus $93,454), which equals 15% of $6,546, or $981.90. That amount is repaid through monthly reductions to OAS payments from July 2026 to June 2027. The recovery tax is capped at the OAS amount the recipient would otherwise receive.

What counts as net world income

Net world income is the figure on line 23400 of the T1 return: total income from all sources worldwide, minus deductions such as RRSP contributions, union dues, and child care expenses. It includes employment, self-employment, pension income, RRIF withdrawals, RRSP withdrawals, interest, dividends (grossed-up amount for eligible Canadian dividends), capital gains (taxable portion), and rental income. It does not include TFSA withdrawals, GIS, the OAS pension itself, or principal residence sale proceeds within the principal residence exemption.

The dividend gross-up for eligible Canadian dividends inflates net world income relative to actual cash received. Strategies to reduce net world income for clawback purposes include shifting income to a TFSA, pension splitting with a spouse, and timing of capital gains realizations.

Pension splitting and the clawback

Eligible pension income (RRIF and life annuity payments after age 65, plus other defined benefit pension income at any age) can be split up to 50% with a spouse on the T1 return. Splitting reduces the higher-earning spouse’s net world income and therefore reduces or eliminates the OAS recovery tax. Pension splitting is an annual return-time election and does not affect actual cash flow during the year.

Withholding versus assessment

OAS recovery tax is withheld monthly from OAS payments based on the prior year’s tax return. If actual income for the current year is lower or higher than the prior year, the difference is reconciled when the current year’s T1 is filed. Recipients who expect their income to drop substantially can request that Service Canada reduce monthly recovery tax withholding through Form T1213 (OAS).

Deferring OAS to manage clawback exposure

OAS can be deferred up to age 70 in exchange for a 0.6% increase per month past 65, up to a maximum 36% increase at age 70. Deferral is occasionally useful for clawback management: a retiree with high income from age 65 to 69 (perhaps from RRIF withdrawals) might defer OAS to age 70 when income has dropped, capturing both the higher monthly amount and avoiding clawback during the high-income years.