OAS Clawback in Canada (2026): The 15% Recovery Tax, Thresholds and Worked Math

Short answer: If your individual net income for 2026 is above $95,323, you repay part of your Old Age Security pension at 15 cents on the dollar. The repayment is the government's official OAS pension recovery tax; "clawback" is the everyday word. The test is per person, not per household, and the bill for a 2026 income year arrives as smaller monthly OAS deposits from July 2027 through June 2028. Model your own income on the OAS clawback calculator as you read. Rules below come from Canada.ca pages cited by section. Dollar examples are labeled hypothetical because your income mix, OAS amount, and residence years will differ.

By Finance Editorial Desk | October 12, 2026

Educational only, not tax or financial advice. OAS amounts are indexed quarterly and thresholds are indexed annually; check the Service Canada recovery tax page for the current quarter before acting. Rules are stated from official sources current to this guide. Confirm your net income, OAS amount, and residency with your Service Canada notice and a qualified tax professional before you file.

1. What the clawback actually is

Old Age Security is a monthly pension paid from age 65, based on how long you have lived in Canada after turning 18, not on what you contributed. Forty years of residence buys the full pension; ten to thirty-nine buys a partial one (years divided by forty); fewer than ten buys nothing. Service Canada enrolls most people automatically when it has enough information.

The clawback is the income test on top of that. Each year the government sets a minimum income threshold. Net income above it repays OAS at a fixed rate of 15 percent, up to the full amount of OAS you received. There are no brackets and no marginal zones: it is linear from the first dollar over the line to the dollar where the pension hits zero.

Three official details shape everything else in this guide:

• The test is your individual net world income. A married couple gets two separate thresholds.
• The recovery tax is separate from ordinary income tax. You pay both.
• The government collects it by shrinking your monthly OAS cheques in a twelve-month recovery period, then reconciles the exact amount on your tax return.

2. The official threshold table

Canada.ca publishes the thresholds as a three-row table: recovery tax period, the income year tested, the minimum threshold where the clawback starts, and the maximum income where the pension is fully recovered, split by age group. Here are the rows as published, with the estimate footnote preserved:

*Estimates from January to September of the current tax year, based on maximum OAS pension amounts. From October to December the amounts are final.

Two things to notice. First, the "income year" and the "recovery period" are different years. Your 2026 tax return sets your OAS deposits for July 2027 through June 2028. Second, the 75-and-over column sits higher because seniors 75 and older receive a permanently larger OAS pension from the 10 percent increase that took effect in July 2022, so there is more pension to claw back.

The maximum OAS pension for October to December 2026 is $762.50 a month for ages 65 to 74 and $838.75 a month for ages 75 and older. Service Canada reviews amounts every January, April, July, and October against the Consumer Price Index, and published rates do not fall just because inflation dips. Your actual payment depends on income, age, and residence years, so treat published figures as maximums.

3. The formula, exactly

Canada.ca states the repayment as a two-step calculation: find how far your income sits above the threshold, then take 15 percent of that gap. The recovery tax is the smaller of that result and the OAS you actually received.

Recovery tax = 15% x (net world income - threshold), capped at your OAS received

Canada.ca works the official example this way: threshold for 2025 is $93,454; income of $100,000 leaves a gap of $6,546; 15 percent of the gap is $981.90; that is the repayment for the July 2026 to June 2027 period.

The arithmetic is one line, which is why the surprises in this guide never come from the formula. They come from which income counts, whose income counts, and when it counts.

4. What counts toward net world income

The test uses net world income, the figure on line 23400 of your return, in Canadian dollars. Line 23400 is income from all sources worldwide after standard deductions, so the question is never "is this income" but "does it land on the return as income."

Counts toward the test:

• Employment and self-employment income, CPP and QPP payments, RRSP and RRIF withdrawals, workplace pension income, rental income, and taxable capital gains at the one-half inclusion rate.
• Eligible dividends at their grossed-up value: the cash dividend enters net income at 138 percent of what you received, because of the 38 percent gross-up. A retiree living on dividends can cross the threshold on paper while the bank deposits look modest.
• Foreign income, converted to Canadian dollars.

Does not count:

• TFSA withdrawals. Money comes out with no tax slip and no line on the return.
• The principal of a non-registered sale: only the capital gain (halved by the inclusion rate) counts, not the proceeds.
• Gifts and inheritances received (taxed in the estate, not to you).

The most common shock is the dividend gross-up. A hypothetical $50,000 of eligible dividends adds $69,000 to net income ($50,000 x 1.38), not $50,000. Anyone estimating from bank deposits will undercount.

5. The timing: the bill arrives a year late

This is the part that confuses people who open a July deposit and find it smaller than June's. The sequence for the 2026 income year:

1. During 2026 you earn whatever you earn. Nothing happens to your OAS in 2026.
2. You file your 2026 return in the spring of 2027.
3. CRA computes your actual recovery tax from your 2026 net income and reconciles it on your return (it appears as the social benefits repayment).
4. From July 2027 through June 2028, Service Canada reduces your monthly OAS deposits based on your 2026 income.

So a one-time income spike in 2026, a big capital gain from selling a property, a large RRIF withdrawal, shrinks OAS cheques starting the following July and running a full year. Planning has to happen in the income year, not when the smaller cheques arrive. By then the return is filed and the math is done.

A related quirk: because the reduction uses filed income, someone whose income dropped can ask Service Canada to use an estimate of current-year income instead of last year's return (form T1213(OAS) is the request form for reduced withholding). The final recovery tax is still settled on the return.

6. Four worked examples, labeled hypothetical

Every number below is labeled hypothetical. Thresholds are the official 2026 income-year figures; incomes, OAS amounts, and rates are invented for illustration.

Example 1: a single 68-year-old over the line. Net world income for 2026 is a hypothetical $110,000. The gap above $95,323 is $14,677. The annual recovery tax is 15 percent of that, $2,201.55. Spread over the July 2027 to June 2028 recovery period, that is about $183.46 a month held back from OAS deposits. If this retiree received a hypothetical $762.50 a month of OAS, the net deposit lands near $579.04 a month. Run the same inputs on the OAS clawback calculator to see the percentage-of-pension-lost view.

Example 2: just barely over. Net income of a hypothetical $96,500 leaves a gap of $1,177. The recovery tax is $176.55 for the year, about $14.71 a month. Worth seeing because the clawback does not wait for a round number. It starts at the first dollar over the threshold, which is why precise year-end income estimates matter more than rough ones.

Example 3: the dividend surprise. A hypothetical retiree receives $50,000 in eligible dividends and $45,000 from a workplace pension. Bank deposits total $95,000, under the threshold on a naive read. But the dividends enter net income at 138 percent, so the return shows $69,000 plus $45,000, or $114,000. The gap is $18,677 and the recovery tax is $2,801.55 a year. The gross-up alone created the clawback. This is the retiree the calculator's dividend input exists for.

Example 4: where the pension hits zero. Take the official maximum income for 2026: $161,320 for someone 75 or older (estimate until finalized in October 2027). Past that income, with a full pension, the entire OAS is recovered and the monthly deposit is zero. The same arithmetic on a hypothetical $10,065 annual OAS: $10,065 divided by 0.15 is $67,100 of gap, and $95,323 plus $67,100 is $162,423, which sits near the official estimate. The gap between the two is the quarterly OAS indexing the official estimate accounts for. Either way, the pension is gone around $160,000 of net income for a full-pension senior.

7. The couple math: two thresholds, one planning tool

The clawback tests each person separately. A household with $190,000 of combined income can owe nothing if it is split $95,000 and $95,000, and owe thousands if it is $150,000 and $40,000. Here is the labeled-hypothetical arithmetic:

• Spouse A: $120,000 net income (RRIF $80,000 plus CPP $40,000). Spouse B: $30,000. A's gap is $24,677; A's recovery tax is $3,701.55. B owes nothing.
• Now A splits $30,000 of eligible RRIF income to B on form T1032. A drops to $90,000 (under the threshold, zero recovery tax) and B rises to $60,000 (still under, zero). The household keeps $3,701.55 a year it was losing.

Eligible pension income can be split up to 50 percent with a spouse or common-law partner, and RRIF income qualifies from age 65. The split is a paper reallocation on the return, not a change in who receives the money. It does not change total household tax the way bracket math does; its distinctive payoff is exactly this, pulling the higher earner under the recovery-tax threshold. Both spouses sign the election.

One caution on this lever: splitting raises the lower earner's net income, which can matter for that spouse's own benefits and credits. Run both returns before electing.

8. The deferral trade-off

You can delay OAS up to age 70. Each month of delay past 65 adds 0.6 percent to the pension, to a maximum increase of 36 percent at 70. A larger pension also raises the income where the clawback fully wipes it out, because there is more to recover at 15 cents on the dollar.

Deferral does not exempt you from the recovery tax. It changes the amount at risk. The choice is a bet on longevity and on your income path between 65 and 70: deferring while still earning a high salary can mean larger OAS later that is then partly clawed back, while taking it at 65 during lower-income years can mean smaller payments that survive intact. There is no universal right answer, which is why the deferral question belongs in a full drawdown plan rather than a clawback article alone.

9. Levers people actually use

Beyond pension splitting, the practical moves all work the same mechanism: keep line 23400 under the threshold in the years OAS is in payment.

• Drawdown sequencing. RRIF withdrawals count as income; TFSA withdrawals do not. Retirees with both sometimes draw the TFSA first in years when OAS is at stake. The TFSA has no minimum withdrawal and no tax slip, which makes it the flexible tap.
• Timing one-time gains. A property or business sale creates a single-year spike. Where the seller has any control over the closing year, or over instalment receipts, the spike year is the year to model first, because the clawback follows it into the next July-to-June period.
• RRSP contributions while eligible. Deductible RRSP contributions reduce net income. Contributions are allowed up to the year you turn 71, so early-retirement years with earned income can still buy room under the line.
• Smoothing RRIF withdrawals. Large lump withdrawals in one year can cost more in recovery tax than the same total spread across years, once the 15 percent clawback is stacked on top of the marginal tax rate. The combined bite on a dollar just over the threshold can exceed 60 percent for some taxpayers, which changes the "take it all now" calculus.
• Watching the gross-up. Dividend-heavy retirees should estimate net income at 138 percent of eligible dividends, not at the deposit amount, before declaring themselves safely under the line.

What does not help: charitable donations reduce tax payable through a credit but do not reduce net income, so they do not move the clawback test. Medical expenses work the same way. Anyone selling a "clawback reduction" product based on credits is selling the wrong mechanism.

10. Mistakes that cost real money

Assuming the household is tested together. It is not. The couple in section 7 lost $3,701.55 a year to a misunderstanding that a T1032 election fixes.

Forgetting the one-year lag. The smaller cheques arrive a full year after the income year that caused them, so people blame the wrong year and plan for the wrong one.

Counting deposits instead of net income. Dividends at 138 percent, capital gains at half the gain, and RRIF withdrawals in full all make the return number larger than the bank statement suggests.

Confusing the recovery tax with the GIS test. The Guaranteed Income Supplement is a separate income-tested benefit with its own thresholds and its own reduction math. OAS recovery tax applies to the OAS pension. A senior can be affected by one, both, or neither.

Treating the threshold as fixed. It is indexed every year. $93,454 for 2025 became $95,323 for 2026. Planning with last year's number understates the room slightly, and the maximum-income column moves too.

11. Frequently asked questions

Is the OAS clawback based on my household income or just mine? Just yours. The recovery tax tests individual net world income against the threshold. Your spouse's income does not enter your calculation, which is why pension splitting between spouses can eliminate a clawback that looks unavoidable on one return.

Do TFSA withdrawals trigger the clawback? No. TFSA withdrawals are not income and do not appear on your return, so they do not raise net world income. That is what makes the TFSA the preferred spending tap in years when you are near the threshold.

Do RRIF withdrawals count? Yes, in full. Every dollar withdrawn from a RRIF (or RRSP) lands on the return as income and pushes toward the threshold. Minimum RRIF withdrawals are mandatory and cannot be avoided, which is why drawdown sequencing matters before OAS age.

What happens to the clawback if I delay OAS to age 70? Your pension grows 0.6 percent for each month of delay, up to 36 percent, and the recovery tax still applies to the larger amount. Deferral raises the income at which the pension is fully clawed back. Whether that helps depends on your income in the deferral years versus the payment years.

Can I get the clawback reduced during the year instead of waiting for my tax return? The monthly reduction is based on filed income, but if your income has dropped you can ask Service Canada to base withholding on an estimate of the current year using form T1213(OAS). The final recovery tax is still reconciled on your return.

Does the recovery tax apply to the Guaranteed Income Supplement too? No. The recovery tax applies to the OAS pension. GIS is reduced by its own income test. The two programs test income separately and reduce different payments.

Where does the repayment show up on my tax return? CRA computes it from your net income and reports it as the social benefits repayment. Your monthly OAS deposits during the recovery period are reduced to collect it in advance, and the return settles any difference.

12. Related reading

• OAS Clawback Calculator - enter your income mix and OAS amount to get the annual recovery tax, the monthly reduction, and the percentage of pension lost.
• RRSP vs TFSA in Canada - which account to draw from when the clawback line is near, and how contribution room works for each.
• Capital Gains Tax in Canada - the one-half inclusion rate that decides how much of a sale lands on line 23400 in a spike year.
• RRIF Minimum Withdrawal Calculator - the mandatory withdrawals that count toward the test every year from age 71.

13. Sources

• Government of Canada, Old Age Security pension recovery tax: threshold table by recovery period and the 15 percent repayment rule (canada.ca/en/services/benefits/publicpensions/old-age-security/recovery-tax.html).
• Government of Canada, Old Age Security payment amounts: maximum monthly amounts by quarter, including October to December 2026 (canada.ca/en/services/benefits/publicpensions/old-age-security/payments.html).
• CRA guidance on net world income and the social benefits repayment as applied on the T1 return.