This page explains the OAS recovery tax, usually called the clawback: how it’s calculated, which income counts, how it’s collected, and the ways to reduce it. For your own figure, use the OAS clawback calculator; for OAS in general, the OAS guide.
How the clawback works
If your net world income is above the threshold ($93,454 of 2025 income), you repay 15% of the amount above it as recovery tax, taken from the OAS payments for the July 2026 to June 2027 period; the pension is fully recovered at about $152,062 (under 75) or $157,923 (75 and over). Both full-recovery incomes are Service Canada’s figures for 2025 income. In a formula:
Clawback = (net income − $93,454) × 15%
The threshold is indexed each year, and each threshold applies to a July-to-June period, based on income from the calendar year before the period starts:
| Net income (2025 tax year) | OAS impact |
|---|---|
| Below $93,454 | No clawback, full OAS |
| Above $93,454 | 15% recovery tax on income above the threshold |
| $152,062+ (age 65-74) | OAS fully eliminated |
| $157,923+ (age 75+) | OAS fully eliminated |
Source: Employment and Social Development Canada – Old Age Security payment amounts (OAS Recovery Tax). View source. The threshold applies for the July 2026 to June 2027 payment period, based on 2025 net income; reviewed annually each July.
| Income year | Deductions apply | Threshold |
|---|---|---|
| 2024 | July 2025 to June 2026 | $90,997 |
| 2025 | July 2026 to June 2027 | $93,454 |
| 2026 | July 2027 to June 2028 | $95,323 |
(Source: Service Canada, OAS recovery tax.)
The clawback at different incomes (ages 65 to 74)
Net income here is 2025 income, and “Monthly OAS kept” starts from the October to December 2026 maximum of $762.50 a month ($9,150 a year).
| Net income | Excess over threshold | Annual clawback | Monthly clawback | Monthly OAS kept |
|---|---|---|---|---|
| $93,454 or less | $0 | $0 | $0 | $762.50 (full) |
| $100,000 | $6,546 | $982 | $82 | $681 |
| $110,000 | $16,546 | $2,482 | $207 | $556 |
| $120,000 | $26,546 | $3,982 | $332 | $431 |
| $130,000 | $36,546 | $5,482 | $457 | $306 |
| $140,000 | $46,546 | $6,982 | $582 | $181 |
Computed from the July 2026 to June 2027 recovery tax: 15% of net income above $93,454, applied against this age group's $9,150 maximum annual OAS. Source: Employment and Social Development Canada – Old Age Security payment amounts (OAS Recovery Tax). View source.
At that October to December 2026 maximum, the clawback takes the whole pension at net income of $154,454 for ages 65 to 74 and $160,554 at 75 and over (the threshold plus the annual maximum ÷ 15%).
Because the rate is flat, every $1,000 of income above the threshold costs $150 of OAS. With net income of $105,000, for example, the clawback is $1,732 a year. The deferred pension from deferring OAS is larger, so it takes more income to claw it back entirely.
Which income counts
The clawback uses net income before adjustments, line 23400 of your return, including income from outside Canada.
| Counts | Doesn’t count |
|---|---|
| Employment and self-employment income | TFSA withdrawals |
| CPP or QPP, and employer pensions | Return of capital distributions |
| RRSP and RRIF withdrawals | The tax-free part of a principal residence gain |
| Interest and rental income | Non-taxable amounts such as most lottery winnings |
| Dividends, at their grossed-up amount | |
| Taxable capital gains (50% of the gain) | |
| OAS itself, and the GIS (included in net income even though the GIS isn’t taxed) |
Dividends count at more than their cash value. The taxable amount is the dividend plus a gross-up of 38% for an eligible dividend or 15% for a non-eligible dividend; it is reported on line 12000, and the taxable amount of non-eligible dividends also on line 12010. At the eligible rate, $20,000 of eligible dividends adds $27,600 to net income. The dividend tax credit reduces tax, not net income.
Deductions lower it. RRSP contributions, pension income splitting and other deductions reduce line 23400; tax credits, such as the donation credit, don’t.
How it’s collected
- On your tax return. OAS is reported as income, and any recovery tax is calculated on the return and claimed as a deduction on line 23500. Your T4A(OAS) slip shows the recovery tax already withheld.
- From your monthly payments. From July each year, Service Canada withholds recovery tax from each OAS payment based on your income from the previous calendar year, as reported on your return. If your income has since dropped (after retirement or a one-time gain, for example), you can ask the CRA to reduce the withholding with Form T1213(OAS). Any difference is settled when you file.
Non-residents are generally subject to the recovery tax too, through the OAS Return of Income; see is OAS taxable?.
Ways to reduce the clawback
| Approach | How it lowers net income |
|---|---|
| Draw from a TFSA instead of a RRIF | TFSA withdrawals aren’t income |
| Pension income splitting | From 65, up to 50% of eligible pension income, including RRIF income, can be allocated to a spouse (Form T1032) |
| Draw down an RRSP before 71 | Withdrawals in lower-income years reduce the RRIF and its required minimum withdrawals later; see the RRSP meltdown strategy |
| Time capital gains | Spreading large sales over several years avoids a one-year spike |
| Hold dividend payers in a TFSA | Avoids the dividend gross-up in net income |
| Defer OAS | Starting later can move OAS to lower-income years (deferring OAS) |
| Spousal RRSP contributions while working | Evens out the two spouses’ retirement incomes |
Pension splitting examples
These show how splitting affects the clawback for the higher-income spouse, assuming the other spouse’s income stays below the threshold after the split.
| Net income before splitting | Amount split to spouse | Net income after | Clawback avoided |
|---|---|---|---|
| $120,000 | $30,000 | $90,000 | $3,982 |
| $105,000 | $15,000 | $90,000 | $1,732 |
Splitting only helps if the spouse’s income stays low enough; moving too much can push their income toward the threshold.
A planning timeline
- Before 65: estimate whether RRSP and pension income will push you over the threshold; build TFSA savings, and consider drawing RRSP funds in lower-income years.
- Around 65: decide when to start OAS and CPP, and whether pension splitting applies.
- From 71: RRIF minimum withdrawals rise with age, so the order you draw from accounts matters more.
Related pages
Sources
The figures and rules on this page come from these sources, last checked against them between September 17, 2026 and October 1, 2026. How we check facts.
- Canada Revenue Agency: Pension income splitting
- Canada Revenue Agency: Eligible dividends
- Canada Revenue Agency: Federal dividend tax credit – Personal income tax
- Canada Revenue Agency: Lines 12000 and 12010 – Taxable amount of dividends from taxable Canadian corporations
- Government of Canada: Old Age Security pension recovery tax
- Government of Canada: Old Age Security payment amounts
- Government of Canada: Federal Worksheet
- Government of Ontario: Ontario dividend tax credit
- Justice Laws (Canada): Income Tax Act
- Prime Minister of Canada: Prime Minister Carney cancels proposed capital gains tax increase