The OAS clawback kicks in once your net income for 2026 passes $95,323. Above that line, the Canada Revenue Agency takes back 15 cents of every additional dollar you earn, until your Old Age Security pension has been fully repaid. If you are between 65 and 74, that happens at roughly $154,753 of net income; if you are 75 or older, the full-recovery point is around $160,696.1Government of Canada. Old Age Security Pension Recovery Tax Both thresholds are indexed to inflation each year.
The clawback is officially called the OAS recovery tax, and it sits on top of the regular income tax you already pay on your pension. OAS is fully taxable: the gross amount from Box 19 of your T4A(OAS) slip goes on Line 11300 of your return and is taxed at your combined federal and provincial rates.2Canada Revenue Agency. Line 11300 – Old Age Security (OAS) Pension The recovery tax is a second, separate charge that only high-income retirees pay.
How the Recovery Tax Is Calculated
The calculation starts with Line 23400 on your T1, your net income before adjustments. From there, CRA subtracts certain items (such as Universal Child Care Benefit income) and adds back certain repayments to reach the figure used for social benefits repayment.3Canada Revenue Agency. Line 23500 – Social Benefits Repayment If that adjusted number is above $95,323 for 2026, you multiply the excess by 15%. The result is your recovery tax.
That amount appears twice on your return: on Line 42200, where it is added to the tax you owe, and on Line 23500, where it comes off as a deduction so the same dollars are not taxed twice. The Federal Worksheet includes a chart that walks through the arithmetic.
For clawback purposes, income means net world income: employment, business income, private and public pensions, capital gains, rental income, interest, and dividends, from Canadian and foreign sources alike.4Canada Revenue Agency. Old Age Security Return of Income (OASRI) Nothing is excluded because it was earned outside the country.
How CRA Collects What You Owe
You don’t wait until next April to hand over the recovery tax. Once CRA assesses your return, it estimates the coming year’s repayment and deducts it directly from your monthly OAS cheques. The recovery period runs July through June: the recovery tax based on your 2026 income is withheld from your OAS payments between July 2027 and June 2028.1Government of Canada. Old Age Security Pension Recovery Tax
If your income climbs during the year and the withheld amount falls short, you pay the difference at filing time. Your Notice of Assessment confirms the final figure.
Strategies to Reduce the Clawback
Because the recovery tax is triggered by net income, anything that legally lowers your net income shrinks or eliminates the clawback. Near the threshold, modest shifts can be worth thousands in preserved pension.
- Pension income splitting. If your spouse or common-law partner earns less than you, you can allocate up to 50% of eligible pension income to them on your returns. Eligible income includes registered pension plan payments and, once you’re 65 or older, RRIF withdrawals. Moving income to a lower-income spouse can bring you back under $95,323.
- Draw from a TFSA before an RRSP or RRIF. Withdrawals from a Tax-Free Savings Account are not income and don’t show up anywhere in the clawback calculation. Spending TFSA money first, and leaving registered withdrawals for later, keeps your reported income lower during the years OAS is at risk.
- Contribute to an RRSP while you still can. You can contribute to an RRSP through the end of the year you turn 71. Every dollar you contribute reduces net income by a dollar, and reduces the clawback directly.
- Base RRIF minimums on your younger spouse’s age. Once an RRSP converts to a RRIF, the required annual withdrawal counts as income. Using a younger spouse’s age produces a smaller mandatory withdrawal.
- Watch the dividend gross-up. Eligible Canadian dividends are grossed up by 38% for tax purposes: $10,000 of actual dividends shows up as $13,800 on your return, and that inflated figure is what the clawback looks at. Capital gains (only 50% included) and return-of-capital distributions are gentler on OAS.
The most effective planning starts before 65. Drawing down registered accounts in your early 60s, when your income is lower, reduces the balance that will force RRIF income later. Realizing large capital gains before OAS begins keeps a one-time sale from spiking a future year’s income above the threshold.
Does Deferring OAS Help?
You can put off starting OAS by up to five years. Each month of deferral adds 0.6% to your eventual payment, or 7.2% per year, reaching a 36% increase if you wait until 70.5Government of Canada. Old Age Security – When to Start Your Retirement Pension The larger pension is still subject to both regular tax and the recovery tax, so deferral does not sidestep the clawback. It can help if you expect your income to be lower after 65, since you’d be collecting a bigger cheque in years when less of it is at risk.
At 75, everyone receiving OAS gets an automatic 10% pension increase.6Government of Canada. Old Age Security – How Much You Could Receive That’s why the full-recovery ceiling is higher for the 75-and-over group: a bigger base pension takes more income to claw back completely. As of early 2026, the maximum monthly OAS is $742.31 for ages 65 to 74 and $816.54 for those 75 and older.7Government of Canada. Old Age Security
One Note on the Guaranteed Income Supplement
The Guaranteed Income Supplement is not taxable and does not count toward the clawback calculation, even though it appears on the same T4A(OAS) slip as your pension.8Canada Revenue Agency. T4A(OAS), Statement of Old Age Security Only the OAS pension itself is exposed to the recovery tax.
If You Live Outside Canada
The clawback rules apply to OAS whether you live in Canada or abroad, but non-residents file using a separate return and the calculation chart in the T4155 guide instead of the standard Federal Worksheet.1Government of Canada. Old Age Security Pension Recovery Tax The 15% rate and the income thresholds are the same.
If you live in the United States, the Canada-U.S. tax treaty steps in. OAS paid to a U.S. resident is taxable in the United States and treated as if it were a U.S. Social Security benefit, meaning up to 85% of the payment can be included in your U.S. taxable income depending on your overall income.9Internal Revenue Service. Taxation of Social Security Benefits Under U.S.-Canada Income Tax Treaty The IRS points taxpayers to Publication 915 for the calculation. On the Canadian side, a 25% non-resident withholding tax may apply, but the treaty can reduce or eliminate it. Filing a Canadian non-resident return using the T4155 guide is how you claim treaty benefits and avoid being taxed twice on the same pension.