OAS Recovery Tax (Clawback): Thresholds, Calculation, and Collection

If your net world income passes $95,323 in 2026, the OAS recovery tax clawback takes back 15 cents of your Old Age Security pension for every dollar above that line, and the pension disappears entirely once income reaches roughly $154,753 for recipients aged 65 to 74 or $160,696 for those 75 and over.¹ The tax hits anyone receiving OAS whose income tops the threshold, and it catches a lot of retirees off guard the year they sell a property or take a large RRSP withdrawal.

Income Thresholds for 2026

For the 2026 tax year, the minimum recovery threshold is $95,323. Everything above that is subject to the 15% clawback. The upper end, where OAS is wiped out entirely, depends on age:

Ages 65 to 74: full clawback at $154,753 of net world income.
Age 75 and over: full clawback at $160,696, because this group receives a higher OAS amount.

The 2026 figures are preliminary and become final in October, once the maximum OAS pension amounts for the rest of the year are known. Thresholds are indexed each year to the Consumer Price Index. The 2025 minimum threshold is $93,454, and the 2024 minimum was $90,997.¹

How the Calculation Works

The formula is simple. Subtract the minimum threshold from your net world income, then multiply by 15%. That’s your annual recovery tax, and it gets spread across your monthly OAS payments during the recovery period.¹

Say your net world income for 2026 is $110,000. The excess over $95,323 is $14,677. Multiply by 15% and you owe $2,201.55 in recovery tax for the year, or about $183.46 taken off each monthly OAS payment. From there the reduction scales up linearly, cent by cent of extra income, until the pension is entirely gone at the upper threshold for your age group.

What Income Counts Toward the Clawback

Net world income is your combined Canadian and foreign income minus allowable deductions.² The main things that count:

Employment and self-employment income, including wages, business profits, and consulting fees.
RRSP and RRIF withdrawals, which are fully taxable. A single large redemption is one of the most common causes of an unexpected clawback.
Investment income: interest, grossed-up dividends, and the taxable half of capital gains.
Net rental income and pensions received from other countries.
The OAS pension itself, which is included in the income figure the CRA uses to calculate the clawback.

Tax-Free Savings Account withdrawals do not count. Because TFSA withdrawals are not taxable income, they never appear in the net world income figure and never push you toward the threshold.

How and When the CRA Collects It

Collection runs on two tracks. The CRA reconciles the actual recovery tax on your annual T1 return, comparing what you owe against anything already withheld. In parallel, monthly deductions come off your OAS payments during a recovery period that runs from July of one year through June of the next. The July adjustment is based on the return you filed the previous spring. Income reported on your 2025 return, filed by April 2026, drives the withholding from July 2026 through June 2027.¹

Ways to Reduce What You Owe

Because the clawback depends entirely on net world income, the timing and type of income you draw matters. A few approaches make a real difference.

Lean on the TFSA. Withdrawals are invisible to the clawback formula. If you hold both registered and TFSA savings, drawing from the TFSA in years when your income is near the threshold keeps you under it.

Draw down RRSPs earlier. Converting RRSP funds to income in your early 60s, before OAS begins, shrinks the RRIF balance that will force mandatory minimum withdrawals later. Those minimums after age 71 are a common clawback trigger because you can’t turn them off.

Split eligible pension income with a spouse or common-law partner. Up to 50% of eligible pension income can be allocated to the lower earner on your returns, which can bring the higher earner below the threshold.

Avoid concentrating income in one year. Selling property, cashing in a large investment, or taking a retiring allowance in a single tax year can push you past the upper threshold. Spreading the event across two or more years limits the damage to a single recovery period.

Asking to Lower Your Monthly Withholding

If your income has dropped sharply from the prior year, the automatic deductions based on that older return will overshoot. You can ask the CRA to reduce the withholding using Form T1213OAS, Request to Reduce Old Age Security Recovery Tax at Source.³ This applies when someone fully retires, sells an income-producing asset, or stops drawing from an RRSP.

The form asks for a detailed estimate of your net world income for the current year and the reason for the drop. Send it to the CRA tax centre for your region well before the July adjustment date; processing takes several weeks, so early spring is the safe window. If approved, you’ll get a confirmation letter with the new monthly amount and the dates it applies. Be conservative with your estimate. If actual income comes in higher, you’ll owe the difference at filing time and may face interest.

If You Live Outside Canada

Non-residents receiving OAS are still subject to the recovery tax, but tax treaties can change the outcome. Under Article XVIII of the Canada–United States Income Tax Convention, Canadian social security benefits including OAS paid to a U.S. resident are generally taxable only in the United States, treated as if they were U.S. Social Security.⁴ In practice the Canadian clawback typically does not apply to U.S. residents the way it does to residents of Canada. U.S. residents still report the OAS income on their U.S. federal return as part of worldwide income, because the treaty’s saving clause preserves U.S. taxation of its own residents on all income.⁵ Residents of countries without a comparable treaty provision, or where the non-resident tax on Canadian pensions is 25% or more, remain fully subject to the Canadian recovery tax.¹

If You Think the Amount Is Wrong

You cannot file a formal notice of objection against the recovery tax itself.⁶ The CRA treats it as a mechanical result of your income assessment, not a separate item you can dispute on its own. What you can challenge is the underlying assessment: income the CRA counted that you didn’t actually receive, or a deduction it disallowed. Fixing the assessment fixes the clawback.

For individuals, the deadline to file an objection is the later of one year after your filing deadline or 90 days from the date on the notice of assessment. You can file through the CRA’s My Account portal or by mailing Form T400A to the Chief of Appeals at your regional Appeals Intake Centre. If the CRA upholds the assessment, you have 90 days from the date of its decision to appeal to the Tax Court of Canada. You can also appeal if the CRA hasn’t responded to your objection within 90 days.⁶

1
Canada.ca. Old Age Security Pension Recovery Tax
2
Canada Revenue Agency. Old Age Security Return of Income (OASRI)
3
Canada Revenue Agency. T1213OAS Request to Reduce Old Age Security Recovery Tax at Source
4
Internal Revenue Service. United States – Canada Income Tax Convention
5
Internal Revenue Service. Publication 597, Information on the United States-Canada Income Tax Treaty
6
Canada Revenue Agency. Resolving Your Dispute: Objection and Appeal Rights Under the Income Tax Act