OAS Clawback in Canada: What It Is and How to Reduce It (2026 Guide)

Here’s how the OAS clawback works in 2026, and what you can do to minimize it.

Are you counting on your full Old Age Security (OAS) pension to help cover your costs in retirement? You’ve worked hard and paid into the system for decades. But if your income is above a certain level, the government may ask for some of that money back. This is the process most people call the OAS clawback.

Understanding how the clawback works, what triggers it, and how to plan around it can change how much you keep each month. Here’s what you need to know heading into 2026.

What Is the OAS Clawback?

The OAS clawback, officially called the Old Age Security Recovery Tax, is a mechanism the federal government uses to reduce or eliminate OAS payments for higher-income seniors. The idea is that OAS is meant as a basic income floor for retirees. If your income already exceeds a set threshold, you are required to repay a portion of what you received.

The clawback is not a penalty. It is the government recapturing benefits paid to seniors who, in hindsight, had income high enough that they did not need them.

Who Is Affected by the OAS Clawback in 2026?

Let’s use the coming year as an example. For the July 2026 to June 2027 OAS payment period, the government uses your 2025 net world income to decide whether a clawback applies. The minimum recovery threshold for 2025 income is $93,454. If your 2025 income exceeded that amount, your OAS payments from July 2026 onward will be reduced.

The full clawback thresholds for this period (the point where OAS drops to zero) are approximately:

• $152,062 for seniors aged 65 to 74
• $157,923 for seniors aged 75 and over (reflecting the 10% OAS increase for this age group)

These upper figures are estimates, because they move with the maximum OAS amount, which the government adjusts every quarter. If your income reaches or exceeds them, your OAS payment is reduced to zero for that period.

For 2026 income (which affects your July 2027 to June 2028 payments), the minimum threshold rises to an estimated $95,323, since the threshold is indexed to inflation each year. The Canada Revenue Agency confirms the final figure in the fall.

How Is the OAS Recovery Tax Calculated?

The calculation is straightforward. You repay 15 cents for every dollar your net income exceeds the threshold. The government calls this the 15% recovery tax.

Example: Suppose your 2025 net income was $110,000.

• $110,000 − $93,454 = $16,546 above the threshold
• $16,546 × 15% = $2,481.90 owed in recovery tax

That works out to roughly $206.83 deducted from your OAS each month during the July 2026 to June 2027 period.

You do not calculate this yourself. Service Canada will send you a letter before the recovery period begins, outlining your estimated clawback amount and the resulting monthly reduction to your OAS. There is no lump-sum repayment at tax time. The deduction happens throughout the year.

Strategies to Reduce or Avoid the OAS Clawback

There is no single solution that works for everyone, but there are several planning strategies worth discussing with a financial advisor.

Delay receiving OAS. You can defer your OAS pension from age 65 up to age 70. For each month you delay, your payment increases by 0.6% (up to 36% more at age 70). If you are still working or have high income in your mid-60s, delaying OAS until your income naturally drops can reduce or eliminate the clawback entirely.

Draw from your TFSA. Withdrawals from a Tax-Free Savings Account are not counted as taxable income, so they do not push you over the OAS threshold. Drawing on TFSA funds to supplement your income (rather than RRIF or other registered income) is one of the most effective ways to manage your annual taxable income in retirement.

Pension income splitting. If your income is significantly higher than your spouse’s or common-law partner’s, you may be able to allocate up to 50% of eligible pension income to your lower-income spouse. This can bring your net income below the clawback threshold and reduce or eliminate your recovery tax.

Manage RRIF withdrawals. Once your RRSP converts to a RRIF at age 71, minimum withdrawals are mandatory. You can still plan the timing of additional withdrawals strategically. Drawing down your RRSP early, before OAS begins, or taking larger RRIF withdrawals in years when your other income is lower, can help you avoid the income spikes that trigger the clawback.

Charitable giving. Significant charitable donations can generate tax credits that reduce your net income, potentially bringing it below the clawback threshold. If you are charitably inclined, this is worth exploring with a tax professional.

When the OAS Clawback Contributes to Financial Stress

For some retirees, the clawback is an unexpected shock. If you are on a fixed income and were counting on the full OAS amount, losing $100 to $400 or more per month can strain an already tight budget, especially if you are also managing debt, rising housing costs, or unexpected health expenses.

Seniors who are struggling financially are sometimes surprised to learn that debt relief options are still available to them. If your retirement income is no longer covering your obligations, it may be time to speak with a professional.

Frequently Asked Questions About the OAS Clawback

What is the OAS clawback threshold for 2026? For OAS payments running July 2026 to June 2027, the clawback is based on your 2025 net income. The minimum threshold is $93,454. For 2026 income (affecting 2027–28 payments), the threshold is approximately $95,323.

How much do you repay under the OAS recovery tax? You repay 15% of every dollar your net income exceeds the threshold, which works out to 15 cents per dollar over the limit.

Can you avoid the OAS clawback entirely? Possibly. Common strategies include delaying OAS, using TFSA income, pension income splitting, and managing RRIF withdrawals to keep your annual net income below the threshold. A financial advisor can help you build a plan based on your specific situation.

Is CPP subject to a clawback? No. The Canada Pension Plan (CPP) is not subject to any clawback. The recovery tax applies only to OAS payments.

Does the OAS clawback threshold change every year? Yes. The threshold is indexed to inflation and adjusted annually. Always confirm the current year’s threshold with Service Canada or a qualified financial professional.

Get Debt Help

Our Licensed Insolvency Trustees work with Ontarians at every stage of life, including seniors managing retirement on a reduced income. Whether you have questions about debt in retirement or want to explore formal options like a Consumer Proposal or Bankruptcy, we are here to help.

Contact Adamson & Associates to speak with a Licensed Insolvency Trustee. John Adamson, CPA, CMA, CIRP, LIT, is the principal Licensed Insolvency Trustee. He has helped individuals and families across Southwestern Ontario find a fresh start for 30+ years. Day or evening, we are open late to help you.

This article is provided as general information only and does not constitute financial, tax, or legal advice. OAS thresholds and recovery tax rules are updated annually, so always consult a qualified financial advisor, tax professional, or Service Canada directly for guidance specific to your situation.