The 15% tax most people don’t know they’re paying.

If you’re searching for what the OAS clawback is, how the threshold works, or how to avoid it, the short version is below and the detail follows.

The OAS clawback, officially the Old Age Security recovery tax, reduces your OAS when your net income passes a threshold set each year. For 2026 income that threshold is $95,323. For 2025 income, which determines payments from July 2026 to June 2027, it was $93,454. Above the line you repay 15 cents of OAS for every dollar, until the benefit is gone entirely somewhere around $155,000 depending on your age.

There’s a point in retirement where an extra dollar of income costs you about forty cents instead of twenty-eight.

Nothing announces it. Your bracket doesn’t change. The rate on your tax return looks the same as everyone else’s. But somewhere in the background Old Age Security is being taken back, fifteen cents at a time, and the effect is identical to a tax increase.

How it works

Once your net income passes a threshold, you repay 15 cents of OAS for every dollar above it. For the 2026 tax year that threshold is $95,323. Go past it and the repayment continues until OAS is gone entirely.

The repayment is calculated on the previous year’s income, which is why it tends to surprise people. Income in 2026 determines what happens to payments between July 2027 and June 2028.

What an extra dollar actually costs

Why it catches people

Three things push income over the line, and all of them arrive at once.

RRIF minimums. Starting the year you turn 72, a percentage of the account comes out whether you need it or not, and the percentage rises every year. Someone with a large registered balance can be forced over the threshold by the minimum alone.

CPP and OAS themselves. Both are taxable income. If you deferred them to 70 they’re larger, which is usually the right call, and they also fill bracket room.

A one-time event. Selling a property, realising a large capital gain, winding up a corporation. A single year of unusual income can cost a full year of OAS, and nobody warns you before you sign.

What actually helps

TFSA withdrawals aren’t income. They don’t appear on your return at all, so they don’t count toward the threshold. This is the single most useful feature of a TFSA in retirement, and it’s the reason the years before 72 are worth using to fill one.

Drawing the RRSP down earlier. Smaller registered balance at 72 means a smaller forced minimum, which means more room under the threshold for the rest of your life. That’s the argument made in full in the ten years that decide your retirement tax bill.

Pension income splitting. Moving eligible pension income to a lower-income spouse can bring both of you under the threshold where one of you was over it.

Timing the one-time events. If a sale can land in a year when other income is low, or be spread across two years, that’s often worth more than anything clever done with the proceeds afterwards.

Who this matters to

Not everyone. If your retirement income sits comfortably below the threshold, this is a non-issue and you can stop thinking about it.

It matters if you have a large RRSP or RRIF, a defined benefit pension plus registered savings, a corporation you’ll be drawing from, or a property or business you expect to sell. In those cases the threshold isn’t a distant risk. It’s a line you will cross, and the only question is whether it happens by accident or by plan.

Sources: Canada Revenue Agency, Old Age Security pension recovery tax; Income Tax Act, Part I.2. Thresholds are indexed and change annually. This article is general information, not advice about your situation.

Common questions

What is the OAS clawback threshold for 2026?
For 2026 income the threshold is $95,323 of individual net income. For 2025 income, which determines OAS payments from July 2026 to June 2027, the threshold was $93,454. The threshold is indexed each year.

How is the OAS clawback calculated?
You repay 15 cents of OAS for every dollar of net income above the threshold. If your 2026 net income is $110,000, you are $14,677 above $95,323, so the recovery tax is about $2,202 for the year.

Is the OAS clawback based on household income or individual income?
Individual income. Each spouse has their own threshold, which is why pension income splitting can help a couple where one person is above the line and the other is below it.

Do TFSA withdrawals count toward the OAS clawback?
No. TFSA withdrawals are not income and do not appear on your tax return, so they do not affect the recovery tax calculation. This is the main reason a TFSA is valuable in retirement.

At what income is OAS fully clawed back?
Roughly $155,000 of net income for those aged 65 to 74, and higher for those 75 and over who receive a larger OAS amount. The exact figure is indexed and changes each year.

Can I avoid the OAS clawback?
You can often reduce it. Drawing down registered accounts before RRIF minimums begin, splitting eligible pension income with a spouse, using TFSA withdrawals for income, and timing one-time events such as a property sale all help.