OAS Clawback 2026: How to Avoid the Repayment Trap When Your Income Goes Up

Your OAS payment just went up — which is great news. But if your income crosses a certain threshold, the government starts clawing some of it back. It’s called the OAS recovery tax, and a lot of Canadian seniors get caught off guard by it.

Here’s everything you need to know about the 2026 clawback rules, plus the strategies that actually work to protect your monthly payments.

What Exactly Is the OAS Clawback?

The OAS clawback — officially called the Old Age Security Recovery Tax — is a mechanism that reduces your OAS payments when your net world income exceeds a certain threshold. For the 2025 tax year (affecting payments through 2026), that threshold sits at $90,997.

For every dollar of net income above that threshold, you repay 15 cents of OAS. Hit $150,000 in income and you’re repaying a significant chunk. Exceed approximately $148,179 and your OAS could be clawed back entirely.

It doesn’t actually get deducted from your paycheque — Service Canada estimates your repayment and reduces your monthly OAS payments during the following year. That delay catches many retirees off guard.

💡 Pro Tip: The clawback is based on your net world income — not just Canadian income. If you have foreign pensions, rental income, or RRSP withdrawals, those all count toward the threshold.

The threshold is adjusted annually for inflation, but the rate — 15% on every dollar above — has stayed the same for years. So if your retirement income is creeping up, it’s worth paying close attention.

What Counts as Income for the Clawback Calculation?

Notice that TFSA withdrawals don’t count. That’s one of the most powerful planning tools available to Canadian retirees who are approaching the clawback threshold.

5 Proven Strategies to Reduce or Eliminate Your OAS Clawback

1. Maximize TFSA withdrawals instead of RRSP/RRIF. TFSA withdrawals are completely invisible to the clawback calculation. If you have both registered accounts, draw from your TFSA first during high-income years. Re-contribute in lower-income years to rebuild your TFSA room.
2. Pension income splitting with your spouse. If you have eligible pension income (including CPP and RRIF withdrawals after age 65), you can shift up to 50% to your spouse’s tax return. This can push your net income well below the threshold — particularly effective when spouses have very different income levels.
3. Spread large RRSP/RRIF withdrawals over multiple years. Rather than taking a big lump sum in one year, plan smaller withdrawals that keep your income under the clawback threshold. This requires a multi-year income projection — your financial advisor or a good tax software can help model this.
4. Time capital gains strategically. If you’re selling investments with significant gains, consider whether you can defer the sale to a lower-income year. Capital gains (at 50% inclusion) still count toward net income, but timing them right can keep you below the threshold.
5. Defer OAS itself if you’re still working. You can defer your OAS up to age 70, increasing your monthly payment by 0.6% for each month deferred (7.2% per year, up to 36% at age 70). If you’re working past 65 and your income already exceeds the clawback threshold, deferring OAS means you don’t pay the recovery tax on income you were going to give back anyway.

💡 Pro Tip: If your income fluctuates significantly year to year — say, from a large property sale or a one-time RRSP withdrawal — you can actually request that Service Canada not reduce your OAS that year and simply repay the recovery tax when you file your return. This preserves your monthly cash flow during the year.

What Happens If You Don’t Report the Clawback Correctly?

Service Canada estimates your clawback based on your previous year’s tax return and adjusts your OAS payments proactively. But if you have a sudden spike in income — a property sale, a large RRIF withdrawal — your payments might not reflect the true clawback amount in real time.

When you file your tax return, the CRA reconciles everything. If you underpaid the recovery tax, you’ll owe the balance. If you overpaid (because your income dropped), you’ll receive a refund. It’s essentially a true-up system.

The key is to keep your income projections current, especially as you approach the threshold. A surprise $30,000 in RRIF income could cost you several months of OAS payments.

Frequently Asked Questions About OAS Clawback 2026

What is the OAS clawback threshold for 2026?

For the 2025 tax year (which affects OAS payments in 2026–2027), the threshold is $90,997 in net world income. The threshold is adjusted annually for inflation. Once indexed for 2026, it may increase slightly. Service Canada publishes confirmed thresholds each year on their website and via My Service Canada Account.

How much OAS do I lose per dollar over the threshold?

You repay 15 cents for every dollar of net income above the clawback threshold. So if you earn $10,000 above the threshold, you repay $1,500 in OAS. The maximum monthly OAS payment for 2026 is approximately $727–$728 for those aged 65–74, so full clawback would occur around $148,000–$150,000 in net income.

Does GIS count as income for the clawback calculation?

No. Guaranteed Income Supplement (GIS) payments are not included in the net income calculation for OAS clawback purposes. However, GIS itself is income-tested separately — if your income exceeds GIS eligibility limits, you won’t receive GIS, but that’s a different calculation entirely from the OAS recovery tax.

Can I get the clawback reversed if my income drops?

If your income drops significantly from one year to the next, Service Canada will adjust your OAS payments once they process your new tax return. If you’ve been paying more recovery tax than your actual income warranted, you’ll receive a refund. You can also contact Service Canada directly if your income has dropped substantially due to retirement or a life event.

Is TFSA income truly exempt from the OAS clawback?

Yes. TFSA withdrawals do not count as income for any federal income calculation, including the OAS recovery tax. This makes the TFSA one of the most powerful tools for managing income in retirement. It’s worth maximizing your TFSA contributions during working years specifically to have this tax-free flexibility in retirement.

What’s the difference between the OAS clawback and GIS reduction?

The OAS clawback (recovery tax) applies to higher-income seniors who earn above ~$90,997. GIS reduction is the opposite scenario — it applies to lower-income seniors, and GIS payments are reduced by 50 cents for every dollar of income above very low thresholds. They’re two separate income-testing mechanisms that operate independently of each other.

Know the Rules Before They Cost You

The OAS clawback isn’t a penalty — it’s an income-testing mechanism. But without proper planning, it can quietly reduce a benefit you’ve earned over decades of contributions. The good news: with the right strategy, most Canadians near the threshold can reduce or eliminate the recovery tax entirely.

TFSA withdrawals, pension splitting, and strategic RRIF management are the three most accessible tools. If you’re unsure whether your income in 2026 will cross the threshold, it’s worth running the numbers now — before April 28, when the new OAS amounts land in your account.