The OAS clawback — officially called the Old Age Security Recovery Tax — reduces your OAS benefit when your net income exceeds a government-set threshold. For 2026 income, that threshold is $95,323. For every dollar of net income above the threshold, you repay 15 cents of OAS. If your income is high enough, your entire OAS benefit is clawed back.
What Is OAS and Who Gets It?
Old Age Security (OAS) is a monthly federal benefit available to most Canadians aged 65 and older who meet residency requirements. Unlike CPP, OAS is not based on your work or contribution history — it is funded from general tax revenue and paid to eligible Canadians regardless of whether they ever worked.
The maximum monthly OAS payment for July to September 2026 is $751.97 for those aged 65 to 74 and $827.17 for those 75 and older, reflecting the 10% enhancement introduced in 2022. Amounts are adjusted quarterly for inflation.
How the Clawback Is Calculated
The clawback is triggered when your net income — line 23600 on your tax return — exceeds the annual threshold. Here is how the math works:
- 2026 income threshold: $95,323
- Clawback rate: 15% of every dollar above the threshold
- Full clawback point: $155,109 for ages 65 to 74 and $161,088 for ages 75 and older on 2026 income (at these levels, the entire OAS benefit is repaid)
Example: If your 2026 net income is $115,323, you are $20,000 above the threshold. At 15%, that is $3,000 in OAS repayment for the year — or $250 per month withheld from your OAS payments.
The CRA estimates your expected clawback based on the prior year’s income and adjusts your monthly OAS payments accordingly. If your actual income differs, you reconcile on your tax return.
What Counts as Net Income for Clawback Purposes?
The clawback is based on your total net income — not just investment income or pension income. This includes:
- CPP and OAS payments themselves
- RRIF and RRSP withdrawals
- Registered pension plan income
- Employment income
- Rental income
- Capital gains (taxable portion)
- Dividends (grossed-up amount, not just what you received)
The grossed-up dividend rule catches many retirees off guard. Canadian eligible dividends are grossed up by 38% for tax purposes, meaning $50,000 of actual dividends reports as $69,000 of income — pushing you closer to or past the clawback threshold even if your actual cash received was well below it.
When Does the Clawback Actually Hit?
OAS begins at age 65. The clawback applies to the benefit year running July to June, based on the prior calendar year’s income. So your OAS payments from July 2026 through June 2027 are adjusted based on your 2025 tax return, measured against the 2025 threshold of $93,454. Your 2026 income, measured against the $95,323 threshold, sets the recovery tax for July 2027 through June 2028.
If your income is variable — for example, you sold a property or took a large RRSP withdrawal in a single year — you may face a clawback in the following benefit year even if your income typically falls below the threshold.
Strategies to Reduce or Avoid the OAS Clawback
Draw Down Your RRSP Before OAS Begins
Every dollar you withdraw from your RRSP before age 65 reduces the future RRIF balance that will generate mandatory taxable income in retirement. Smaller RRIF withdrawals later means lower net income during OAS years.
Defer OAS to Age 70
For every month you delay OAS past age 65, your benefit increases by 0.6%. At age 70, your OAS is 36% higher than it would have been at 65. If your income is near the clawback threshold, deferring OAS also gives you five additional years to manage your income before the benefit begins.
Income Split with Your Spouse
Pension income splitting can shift up to 50% of eligible pension income to a lower-income spouse, reducing the higher earner’s net income and potentially keeping them below the threshold. CPP sharing is also available and can achieve a similar result.
Use Your TFSA Strategically
TFSA withdrawals are not included in net income. Shifting assets from non-registered or RRSP accounts into a TFSA over time — particularly in lower-income years — creates a future income source that has no impact on the clawback calculation.
Manage Capital Gains Timing
If you have non-registered investments with unrealized gains, staggering dispositions across multiple tax years rather than triggering large gains in a single year can prevent a one-time spike that triggers or deepens the clawback.
See how this played out for a real client → Gordon & Theresa, Odyssey Wealth
Key Takeaways
- The OAS clawback applies when net income exceeds $95,323 (2026 income), at a rate of 15 cents per dollar
- Net income for clawback purposes includes RRIF withdrawals, CPP, capital gains, and grossed-up dividends
- The clawback is based on the prior year’s income — variable income years can cause unexpected reductions
- RRSP drawdown before 65, TFSA use, income splitting, and OAS deferral are the main tools to manage it
- Clawback planning works best when it starts well before age 65, not after OAS has already begun
Related reading
- Pension Income Splitting in Canada: What It Is and How to Use It
- TFSA vs. RRSP in Retirement: Which Should You Draw From First?
- OAS Clawback Estimator
This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP® professional.