The OAS clawback explained: 2026 thresholds and ways to soften it

Last updated Nov 2026.

Old Age Security (OAS) is the monthly pension most Canadians can get from 65, whether or not they ever worked. But if your income in retirement is on the higher side, part of it can be taken back. That's the "OAS clawback," officially called the OAS pension recovery tax.

It sounds scary, and a lot of people worry about it long before it would ever touch them. Here's how it really works, who it affects, and the common ways people plan around it.

What the clawback is

If your net income for the year is above a set threshold, you repay 15% of every dollar above that threshold, up to the full amount of OAS you received. It doesn't switch off your OAS all at once. It fades out gradually as income rises.

The thresholds, from Canada.ca's recovery tax page:

Canada.ca also lists the income level where OAS is fully clawed back. It's higher for people 75 and over, because OAS itself is 10% higher from age 75. For 2025 income, that full-clawback level is $152,062 for ages 65 to 74 and $157,923 for 75 and over.

A worked example

Say your net income for 2025 was $100,000:

• $100,000 minus $93,454 = $6,546 over the threshold
• 15% of $6,546 = $981.90

That's about $82 a month, taken from OAS payments from July 2026 to June 2027. You still keep the rest of your OAS. This example comes straight from Canada.ca.

The key takeaway: going $1,000 over the line costs you $150, not your whole pension.

How it's collected

The clawback is tied to your tax return. When you file, the CRA works out any repayment for that year. It then estimates the next year's repayment from that same income and holds it back from your monthly OAS cheques for July to June. So a high-income year can lower your OAS payments for the following year, even if your income drops afterward. Once your later return shows lower income, the amount is adjusted.

Who it actually affects

Most retirees never pay it. You need net income above about $93,000 to $95,000 per person. Since the test is individual, a couple can have a combined income well above that and still pay nothing, as long as neither spouse is over the line alone.

Situations where people tend to get caught:

• Large RRIF withdrawals, or a big RRSP-to-RRIF balance with high minimums later on (see RRIF minimums)
• Selling a cottage, rental or investments with a large capital gain in one year
• A sizable workplace pension plus CPP plus investment income
• Eligible Canadian dividends, which are "grossed up" on your return and count as more income than you actually received

Ways people soften it

None of these are loopholes. They're normal parts of the tax system, and whether they make sense depends on your whole picture.

1. Pension income splitting

If you're married or common-law, you can generally elect to move up to half of eligible pension income to your spouse on your tax returns. That lowers your net income and raises theirs. From 65, RRIF income counts as eligible pension income for this. The CRA's pension splitting page has the rules.

2. Smooth out RRSP and RRIF withdrawals

Pulling a little more from your RRSP in your 60s, before OAS and CPP start, can mean smaller forced RRIF withdrawals later. The goal is to keep each year's income more even instead of having a few very high years. The retirement withdrawal planner can help you see the pattern.

3. Use your TFSA

TFSA withdrawals aren't taxable income, so they don't count toward the clawback. Money that would otherwise sit in a non-registered account and throw off taxable interest or dividends may do better inside a TFSA. See TFSA vs RRSP for how the two accounts differ.

4. Think about the timing of big gains

If you're planning to sell something with a large capital gain, spreading the sale over more than one tax year (where that's possible) can keep you under the threshold in each year.

5. Consider deferring OAS

You can delay OAS up to age 70. Each month you wait raises your payment by 0.6%, up to 36% more at 70, according to Canada.ca. If you expect a few high-income years in your late 60s (for example, still working), deferring can mean you aren't receiving OAS while it would mostly be clawed back. It works alongside your CPP decision, which we cover in CPP at 60, 65 or 70.

Don't let the tail wag the dog

A 15% clawback is real, but it's rarely worth contorting your whole plan to avoid. Sometimes paying a bit of clawback is cheaper than the alternative, like leaving money in an RRSP to grow into an even bigger taxable RRIF later. Look at your lifetime taxes, not just one year. A tool like how long will my savings last helps with the bigger picture.

FAQ

Is the OAS clawback based on household income?
No. It's based on each person's own net income, line 23400 of the return.

Do TFSA withdrawals count?
No. TFSA withdrawals aren't taxable income, so they don't affect the clawback.

If I'm clawed back once, does it last forever?
No. It's recalculated every year from your latest tax return.

Can I lose all my OAS?
Yes, if your net income is above the full-clawback level for that year (about $152,000 for 2025 income at ages 65 to 74).

Does the clawback affect CPP?
No. CPP has no clawback. Only OAS (and income-tested benefits like the Guaranteed Income Supplement) are reduced by income.

This article is educational only and is not financial or tax advice. Thresholds change every year; confirm the current figures on Canada.ca and consider your full situation, or talk with a qualified professional, before acting.