How does the OAS clawback work, and how can I avoid it?
By Krystian Urbanski, CIM, CIWM, FCSI, PFP · Chief Retirement Strategist, RetirementIQUpdated · 3 min read
The OAS clawback, officially the OAS recovery tax, takes back 15 cents of OAS for every dollar of individual net income above a threshold: $95,323 for 2026 income. For ages 65 to 74, OAS is gone completely at $155,320. Pension splitting, TFSAs, withdrawal timing and deferring OAS can all reduce it.
How the clawback is calculated
If your individual net income for 2026 is above $95,323, you repay 15% of the amount over that threshold, up to the full OAS you received. For ages 65 to 74 that happens at about $155,320 of net income in 2026; for 75 and over, about $161,320, because OAS is higher at that age.
The clawback is based on each person’s own income, not household income. A couple with $180,000 between them may lose nothing if it is split evenly, while a single person with the same income loses all of their OAS.
How it is collected
The recovery tax is calculated on your tax return. Service Canada then withholds it from your monthly OAS payments for the following July to June, based on your previous year’s return. If your income drops, the withholding adjusts after you file.
Seven ways to reduce it
- Split pension income with a lower-income spouse. Up to 50% of eligible pension income, including RRIF income from age 65, can be moved.
- Draw RRSP money before 65, in lower-income years, to shrink future RRIF minimums.
- Use your TFSA. TFSA withdrawals are not income and do not count toward the clawback.
- Defer OAS to 70 if your income will be high from 65 to 70.
- Time capital gains and large withdrawals so they do not land in one year.
- Share CPP with your spouse to even out incomes.
- Hold investments tax-efficiently; Canadian dividends are grossed up for tax purposes, which raises net income.
Helen, 68, has a $70,000 pension, $15,000 of CPP, $9,150 of OAS and $12,000 of RRIF income: $106,150 of net income. She is $10,827 over the threshold, so about $1,624 of her OAS is clawed back. By splitting $15,000 of pension income with her husband, whose income is $40,000, her income falls below $95,323 and the clawback disappears.
What to do next
- Add up each spouse’s expected net income for the next five years.
- Check whether pension splitting evens out your incomes.
- Use your TFSA for large one-time spending.
- Plan RRSP withdrawals before 65 or 71 if your future income looks high.
Free tools that help
Related questions
Do TFSA withdrawals count toward the OAS clawback?
No. TFSA withdrawals are not taxable income, so they do not affect the clawback, GIS or other income-tested benefits.
Is the OAS clawback based on household income?
No. It is based on each person’s individual net income, which is why splitting income between spouses can reduce or eliminate it.
Does the clawback threshold change every year?
Yes. It is indexed to inflation each January. The threshold is $95,323 for 2026 income, up from $93,454 for 2025 income.
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