OAS clawback: how the recovery tax is worked out and how to cut it

How the OAS clawback is calculated

The OAS clawback, officially the OAS pension recovery tax, is 15% of your net world income above a yearly threshold: $93,454 for 2025 income and $95,323 for 2026 income. According to Service Canada, you repay 15% of the difference between your income and the threshold, and the repayment can never be more than the Old Age Security (OAS) pension you received.

The sum has 3 steps:

1. Take your net income before adjustments from line 23400 of your tax return. For most retirees this is the same as net world income.
2. Subtract the threshold for that income year.
3. Multiply what is left by 15%. That is your repayment, capped at the OAS you were paid.

Service Canada's own example: with 2025 income of $100,000, the excess is $100,000 minus $93,454, or $6,546, and 15% of that is $981.90, repaid over July 2026 to June 2027. Check your own figure with the OAS and GIS calculator, which works out the pension, the recovery tax and what is left each month.

According to the Canada Revenue Agency (CRA), the income tested is line 23400 minus any universal child care benefit (line 11700) and registered disability savings plan income (line 12500), plus any repayments of those. The OAS pension itself counts, because it is taxable income reported on line 11300.

OAS clawback thresholds for 2025 and 2026 income

The OAS clawback starts at $93,454 of 2025 income and $95,323 of 2026 income, and removes the whole pension at about $152,062 (2025 income, age 65 to 74). Each income year sets the recovery tax for a July to June period starting in the following year.

The full-repayment figures for 2026 income are estimates. According to Service Canada, from January to September of the current tax year these amounts are based on maximum OAS pension amounts and become final in October. The upper figure is higher at 75 because the OAS pension rises by 10% from age 75, so there is more to claw back.

The maximum OAS pension for July to September 2026 is $751.97 a month at 65 to 74 and $827.17 at 75 and over, according to Service Canada. Service Canada has announced a 1.4% increase for October to December 2026.

Worked example: $110,000 of net income at age 70

A 70-year-old with $110,000 of net world income in 2025 repays $2,481.90 of OAS, about $206.83 a month from July 2026 to June 2027. These figures come from RightSums's OAS engine, run on 27 September 2026, and match the hand working below.

1. Income above the threshold: $110,000 minus $93,454 = $16,546.
2. Recovery tax: $16,546 x 15% = $2,481.90 a year.
3. Monthly deduction: $2,481.90 / 12 = $206.83.
4. OAS left: $751.97 minus $206.83 = $545.14 a month, using the July to September 2026 full pension.

For 2026 income the lower threshold of $95,323 gives an excess of $14,677 and a repayment of $2,201.55. Deferring does not change the recovery tax at the same income, but the larger pension leaves more after it. Each extra $1,000 of income in the clawback range costs $150 of OAS, on top of normal income tax, so the combined rate on that income is your marginal tax rate plus 15 percentage points. See the income tax part for your province on the Canada income tax pages.

To reproduce the first row, enter age 70, a start age of 65, 40 years in Canada, net income $110,000 and the 2025 income year in the OAS and GIS calculator.

When the OAS clawback starts: the July to June recovery period

The OAS clawback is taken from your monthly pension from July, based on the income on your previous year's return. According to Service Canada, if you had to repay part of your OAS for 2025, an amount is deducted from each OAS payment from July 2026, spread over 12 payments instead of a lump sum at tax time, and you get an advisory letter first.

The monthly deductions are a prepayment, not the final bill. The recovery tax withheld appears in box 22 of your T4A(OAS) slip, and you claim it on line 43700 of your return for that year. The real repayment for that year is worked out on the line 23500 chart of the Federal Worksheet and entered on lines 23500 and 42200. If the withholding was too high, the difference comes back as part of your refund.

The lag catches people out after a one-off high-income year, such as selling a cottage: the withholding runs for a year after the income has gone. The T1213(OAS) request below fixes that.

How to reduce the OAS clawback

You reduce the OAS clawback by lowering your line 23400 net income, moving income between years or spouses, or choosing income that does not count. Each method below comes from a CRA or Service Canada rule checked on 27 September 2026.

1. Split eligible pension income with your spouse

Pension income splitting lets you move up to 50% of your eligible pension income to your spouse or common-law partner on Form T1032, filed with both returns. According to the CRA, eligible pension income includes life annuity payments from a registered pension plan and, if you are 65 or older at the end of the year, RRIF and annuity payments. OAS and CPP cannot be split this way. The CRA says splitting affects credits and benefits based on one person's net income, including the repayment of OAS benefits.

Example: Pat, 70, has $110,000 of net income including a $40,000 RRIF. Sam, Pat's spouse, has $30,000. Allocating $16,546 of the RRIF income to Sam brings Pat to exactly $93,454 and Sam to $46,546, both below the 2025 threshold, so the $2,481.90 clawback falls to $0. The couple's income tax also changes, so compare both returns before filing.

2. Time RRSP and RRIF withdrawals

RRSP and RRIF withdrawals are taxable income, so they raise the net income the clawback tests. According to the CRA, an RRSP must be withdrawn, moved to a RRIF or used to buy an annuity by the end of the year you turn 71, and a RRIF must pay a minimum each year from the year after it is set up. The CRA's prescribed factor is 5.40% at age 72, so a $500,000 RRIF must pay at least $27,000 that year, rising to 6.82% at 80. Drawing more in low-income years, such as before your OAS starts, can shrink those later forced minimums. Plan the amounts with the RRIF withdrawal calculator.

3. Hold savings in a TFSA

TFSA income and withdrawals do not count towards the OAS clawback. According to the CRA, a tax-free savings account (TFSA) has no effect on OAS or the Guaranteed Income Supplement, and income earned in it does not affect federal income-tested benefits. Interest, dividends and gains earned in a non-registered account do count, so moving savings into unused TFSA room lowers future net income.

4. Defer OAS to 70

Deferring OAS raises the pension by 0.6% for each month after 65, up to 36% at 70, according to Service Canada. If your income is above the full-repayment level between 65 and 69, for example while still working, OAS taken in those years would be clawed back in full anyway, so deferring loses little and buys a larger pension later. With the full pension deferred to 70, $1,022.68 a month in the example, our working puts the income at which it is all repaid at about $175,268 ($93,454 plus $12,272.16 divided by 15%), an estimate using July to September 2026 rates. You cannot get the Guaranteed Income Supplement while you defer, so this suits higher earners only.

5. Time capital gains

Half of a capital gain is added to your income, because the one-half inclusion rate still applies: the Prime Minister cancelled the proposed rise to two-thirds on 21 March 2025. Spreading a large sale over 2 tax years can keep each year below the threshold.

Example: with $85,000 of other income, a $40,000 gain taken in 2025 adds $20,000, giving $105,000 and a recovery tax of $1,731.90. Selling half in 2025 and half in 2026 gives $95,000 in each year: $231.90 for 2025, and $0 for 2026 because $95,000 is below the $95,323 threshold. Splitting the sale saves $1,500 of OAS (RightSums engine, 27 September 2026).

6. Ask for lower withholding with Form T1213(OAS)

Form T1213(OAS), Request to Reduce Old Age Security Recovery Tax at Source, stops the monthly deductions running on a high income you no longer have. According to the CRA, if your net income was above the 2025 threshold and your 2026 income is expected to be substantially lower, you can ask in writing for Service Canada to reduce the recovery tax withheld from July 2026. It does not change what you finally owe; it changes when you pay it. The CRA also says it cannot approve a reduction of tax withheld at source based on a pension splitting election, so expect any saving from splitting to arrive when you file.

What counts as income for the OAS clawback

Almost all taxable income counts towards the OAS clawback, including the OAS pension itself, CPP, employer pensions, RRSP and RRIF withdrawals, employment income, interest, taxable dividends and the taxable half of capital gains. TFSA income and withdrawals do not count.

CPP is a large part of many retirees' income, and taking it later makes each payment bigger. See how much it adds, and when, with the CPP calculator.

What to do next about your OAS clawback

Start with last year's line 23400 figure and this year's likely income, then check the gap to the threshold.

1. Enter your age, start age and net income in the OAS and GIS calculator to see the recovery tax and the monthly deduction.
2. If you have a spouse, work out how much eligible pension income would need to move to bring you to the threshold, and compare both returns.
3. Before 31 December, decide on RRSP or RRIF withdrawals above the minimum and any capital gains, because each year's income sets a July to June period.
4. If this year's income will be much lower than last year's, send Form T1213(OAS) to the CRA so the deductions from July match your real income.