OAS Recovery Tax Threshold: 2026 Figures, Calculation, and Strategies

The OAS recovery tax threshold for the 2026 tax year is $95,323 of net world income. Once you cross it, the Canada Revenue Agency takes back 15 cents of Old Age Security for every dollar above the line. The full pension is clawed back at $154,753 if you’re 65 to 74, and at $160,696 if you’re 75 or older.¹

The 2026 Threshold Figures

Three numbers matter for the 2026 income year, which drives your monthly OAS deductions from July 2027 through June 2028:¹

$95,323 — the minimum income recovery threshold, where repayment starts
$154,753 — full clawback for ages 65 to 74
$160,696 — full clawback for ages 75 and over, higher because this group receives a 10% pension top-up²

The $95,323 figure is firm. The two upper thresholds are estimates from January through September and get finalized between October and December once actual pension payment data comes in, so they can shift slightly.¹

How the 15% Recovery Tax Is Calculated

Take your net income, subtract $95,323, and multiply what’s left by 15%. That’s your recovery tax for the year.

Say your 2026 net income is $105,323. You’re $10,000 above the threshold. Multiply by 15% and you owe $1,500, which is taken out of the OAS payments you received during the year. The 15% rate holds steady until your income hits the upper threshold, at which point every dollar of OAS you collected goes back.¹

What Income the CRA Counts

The calculation uses Line 23400 of your T1 return — net income before adjustments — not Line 23600. That distinction matters. Line 23400 sits above certain deductions like social benefit repayments, so the figure driving your clawback is slightly higher than the net income number most people quote.³

Almost every income source lands on that line: employment and self-employment income, CPP and QPP benefits, private pensions, rental income, interest, and taxable dividends. Capital gains are included at the 50% inclusion rate; a proposed increase to two-thirds was cancelled in March 2025. Foreign pension income counts too, wherever it comes from.

Income That Doesn’t Count

Tax-Free Savings Account withdrawals are the big exception. Money you take out of a TFSA never touches Line 23400 and won’t reduce your OAS.⁴ Gifts, inheritances, and life insurance proceeds are also outside the net income calculation.

Ways to Stay Below the Threshold

If your income sits close to $95,323, small changes in how you draw or report income can preserve thousands of dollars in OAS. Each of these strategies works by lowering the Line 23400 figure.

Split Pension Income With a Spouse

You can allocate up to half of your eligible pension income to a spouse or common-law partner on your returns. This drops your reported net income and raises theirs. The CRA confirms that pension splitting affects OAS repayment.⁵ It works best when one spouse is comfortably above the threshold and the other well below it.

Draw From Your TFSA Instead of a RRIF or RRSP

In years when you’re brushing against the threshold, pulling from your TFSA instead of a registered account keeps taxable income down.⁴ TFSA room doesn’t restore until the following calendar year, so this needs a multi-year view.

Time Capital Gains Across Years

A single large disposition, like selling a rental property or a concentrated stock position, can spike your income for one year. Spreading sales over two or more tax years keeps each year’s taxable gain smaller. Because half of a capital gain is taxable, a $50,000 gain adds $25,000 to Line 23400, which is enough to trigger a meaningful clawback on its own.

Contribute to an RRSP Before 71

If you still have contribution room and haven’t hit the mandatory conversion age of 71, an RRSP contribution reduces your net income dollar for dollar. This helps most in years with a one-time bump like a severance payment or a property sale.

Deferring OAS to Avoid the Clawback

You don’t have to start OAS at 65. Deferring adds 0.6% per month, or 7.2% a year, to a maximum 36% increase at age 70.⁶

Two situations make deferral especially worth considering. If you’re still working between 65 and 70 with income high enough to trigger the clawback, starting OAS just means handing most of it back. If you expect to live well into your 80s, the larger monthly cheque tends to produce more lifetime income even after accounting for the missed years. The decision is irreversible once your first payment lands, so run your actual income projections before choosing a start date.

How the CRA Collects the Recovery Tax

Two mechanisms are in play.

The first is a lump-sum settlement when you file. The prior year’s recovery tax is calculated on your return and due by the April 30 filing deadline.⁷

The second is automatic monthly withholding. After the CRA processes your return, it estimates the coming year’s clawback and instructs Service Canada to deduct it from your OAS payments. Deductions show up on your Notice of Assessment. The withholding cycle runs July to June, so your 2026 return drives what’s held back from July 2027 through June 2028.¹

Asking for Lower Withholding

When your income drops sharply between years, say you retire mid-year or sold a business the year before, the automatic withholding based on the older return will be too high. Form T1213OAS (Request to Reduce Old Age Security Recovery Tax at Source) asks the CRA to reduce or eliminate the monthly deduction.⁸ Otherwise you’re lending the government money interest-free until your next return clears.

If You Live Outside Canada

Non-residents receiving OAS can face both the recovery tax and a separate non-resident withholding tax, though the combined amount cannot exceed the OAS benefit paid in any given month.⁹

Tax treaties can reduce or eliminate the recovery tax altogether. Residents of the United States, the United Kingdom, Australia, Germany, and dozens of other treaty countries listed in the OASRI guide may be exempt from filing the Old Age Security Return of Income, provided they aren’t planning to move to a non-treaty country before the next benefit period.⁹ If you’re retired abroad or thinking about it, check the treaty status of your country of residence first.

1
Canada.ca. Old Age Security Pension Recovery Tax
2
Canada.ca. Old Age Security – How Much You Could Receive
3
Canada.ca. Repayment of Old Age Security Pension
4
Canada Revenue Agency. Tax-Free Savings Account (TFSA), Guide for Individuals
5
Canada Revenue Agency. Pension Income Splitting
6
Canada.ca. Old Age Security – When to Start Your Retirement Pension
7
Canada Revenue Agency. Due Dates and Payment Dates – Personal Income Tax
8
Canada Revenue Agency. T1213OAS Request to Reduce Old Age Security Recovery Tax at Source
9
Canada Revenue Agency. Old Age Security Return of Income (OASRI) Guide for Non-Residents