How the clawback works, in plain English
Old Age Security is a monthly pension the government pays most Canadians from age 65. Unlike CPP, it is not based on what you paid in. It is based on how long you have lived in Canada, and it comes with one big catch: if your income in retirement is high, the government takes some of it back.
The test is your individual net income for the year, the figure on line 23400 of your tax return. If that number is over the year's threshold, you repay 15 cents of OAS for every dollar above it. The repayment usually shows up as a reduction to your monthly OAS deposits in the payment period that runs from the following July to June, so the bill for a high-income year arrives about a year later.
The clawback is calculated per person, not per household. A couple can each earn up to the threshold with no clawback at all, even if their combined income is well over it.
The 2026 numbers
For income earned in 2026, the clawback starts at $95,323 of individual net income. The maximum OAS pension is $743.05 a month for ages 65 to 74 and $817.36 a month at 75 and older (April to June 2026 rates, adjusted quarterly for inflation).
Because the clawback runs at 15 cents per dollar, a 65 to 74 year old receiving full OAS loses the entire pension once net income reaches roughly $154,767. Between the threshold and that point, OAS shrinks gradually.
What income counts toward the clawback
Almost everything the tax return treats as income counts: RRIF and RRSP withdrawals, workplace pensions, CPP, OAS itself, employment and self-employment income, rental income, interest and the taxable half of capital gains. Canadian dividends count extra, because the tax return grosses them up before the clawback test (a $1,000 eligible dividend shows up as $1,380 of income).
The big exception is the TFSA. Money you take out of a TFSA is not income, so it never pushes you toward the clawback. This one difference is why the order you draw from your accounts can change how much OAS you keep.
Approaches Canadians use to manage it
There is no single right answer, but these are the levers people commonly look at. Each one has trade-offs, which is why running the numbers for your own situation matters more than any rule of thumb.
- Drawing spending money from a TFSA instead of taking more than the required minimum from a RRIF, since TFSA withdrawals do not count as income.
- Splitting eligible pension income with a lower-income spouse, which can pull the higher earner back under the threshold.
- Spreading a large one-time withdrawal over two tax years instead of taking it all in one.
- Drawing down RRSP money before OAS starts, so later RRIF minimums are smaller.
- Deferring OAS to as late as 70, which raises the eventual payment and shortens the years the clawback can apply.
A worked example
Mary is 72 and her 2026 net income is $105,000. That is $9,677 over the $95,323 threshold. Her OAS recovery tax is 15% of $9,677, which is about $1,452 for the year, or roughly $121 less OAS each month. She keeps the rest of her OAS: the clawback trims the pension, it rarely erases it.
Calculated with the same 2026 CRA rules the TruePath engine applies.
How TruePath shows this
TruePath applies the clawback test to every year of your projection, for each spouse separately. It flags the first year the clawback would hit you, shows what it costs in dollars, and lets you compare withdrawal orders, like TFSA-first versus RRIF-heavy, to see how much OAS each approach keeps. You never have to know the threshold. The app watches it for you.
Related questions people ask
What is the OAS clawback threshold for 2026?
$95,323 of individual net income for the 2026 tax year. Above that, OAS is reduced by 15 cents per extra dollar. The threshold is indexed, so it rises most years.
Can OAS be clawed back completely?
Yes. At roughly $154,767 of 2026 net income, the 15% recovery tax consumes the full pension for a 65 to 74 year old. Higher OAS rates at 75 plus push that point a little higher.
Do TFSA withdrawals count toward the OAS clawback?
No. TFSA withdrawals are not taxable income and never affect the clawback, GIS or any income-tested benefit.
Is the clawback based on my income or our household income?
Individual income. Each spouse is tested separately against the threshold, which is why shifting income between spouses (for example with pension splitting) can reduce a couple's total clawback.
How is the OAS clawback collected?
Through withholding: once your tax return shows income over the threshold, Service Canada reduces your monthly OAS payments for the recovery period that runs from the following July through June.
Sources
This page is general education about Canadian retirement rules, not personalised financial advice. Figures are for the 2026 tax year and change with government updates.