The OAS clawback, and what actually reduces it
The recovery tax starts at $95,323 of net income for 2026 and takes 15 cents of every dollar above it. The part that goes unsaid is what that does to the rate on your next dollar — which is not a number any tax table contains.
The rate on your next dollar
43.4% income tax, plus 15¢ of Old Age Security repaid. A tax table would show you the first number only.
The year you are being measured on is not this one
The recovery tax taken from July 2026 to June 2027 is set by your 2025 income. The reduction arrives a year after the income that caused it.
That lag is why a one-off event is so punishing and so confusing. Sell a rental property, take a large RRSP withdrawal or receive a severance, and the pension shrinks the following summer — by which time the money is spent and the connection is easy to miss.
It also means the reduction is not a bill. Service Canada takes it out of each monthly payment across the recovery period, so what you see is a smaller deposit rather than anything labelled as a tax.
What changes the number
The recovery tax is assessed on each person’s own net income, so anything that moves income between years, between people, or out of the calculation entirely will move it.
- Which account the money comes from. TFSA withdrawals are not income and never reach the calculation. RRSP and RRIF withdrawals are, in full.
- Splitting eligible pension income. Up to 50% may be allocated to a spouse or common-law partner, which can move income from a return above the threshold to one below it.
- When the RRSP comes out. An RRSP must be converted by the end of the year you turn 71, after which a minimum withdrawal is compulsory and rises every year. Income drawn before then is chosen; income drawn after it is not.
These are mechanisms, not recommendations. Which of them helps depends on your whole tax position, and that is a conversation for an accountant. This site is not a financial adviser.
Seeing it across a whole retirement
One year at a time understates the problem. The compulsory RRIF minimum climbs with age, so an income that sits below the threshold at 72 can be well above it at 80 without a single decision being made in between. The retirement planner runs the whole projection and totals the Old Age Security lost under each drawdown order, which is the version of this question that has an answer worth acting on.
Common questions
What is the OAS clawback threshold for 2026?
$95,323 of net world income for the 2026 income year, up from $93,454 for 2025. Above it you repay 15 cents of every additional dollar through the Old Age Security recovery tax.
At what income does OAS disappear completely?
At current rates, about $155,481 if you are 65 to 74 and $161,497 from 75, because the pension is 10% larger from 75 and so takes longer to claw back. For the 2025 income year the CRA published those points as $152,062 and $157,923.
Which year's income is the clawback based on?
The previous one, and this surprises people. The recovery tax collected from July 2026 to June 2027 is set by your 2025 income. A one-off spike — selling a property, a large RRSP withdrawal, a severance — therefore reduces payments a year later, when the money that caused it is long spent.
How is the recovery tax collected?
Not as a bill. Service Canada reduces each monthly payment across the July-to-June recovery period, so the pension simply arrives smaller. That is why people notice it as a mysteriously reduced deposit rather than as a tax.
Does the clawback apply to CPP as well?
No. The recovery tax applies only to Old Age Security. The Canada Pension Plan is not income-tested and is never clawed back — though CPP income does count towards the net income figure that decides how much OAS is recovered.
Do TFSA withdrawals affect the OAS clawback?
No. Withdrawals from a Tax-Free Savings Account are not income, do not appear on the return, and so do not enter the net world income the recovery tax is calculated on. Withdrawals from an RRSP or RRIF do.
Can pension income splitting reduce the clawback?
It can, because the recovery tax is assessed on each person's own net income. Up to 50% of eligible pension income may be allocated to a spouse or common-law partner, which moves income from a return that is over the threshold to one that may be under it. Whether it helps in a particular case depends on both incomes, and this is a question for an accountant rather than a website.
Thresholds and the recovery period are the CRA's published recovery tax figures. The combined rate above adds the 15-point recovery to the marginal income tax rate, which is how the CRA describes the repayment — it increases total payable. Federal and Ontario tax tables are current for 2026; other provinces use their published 2026 brackets with credit amounts not yet confirmed, and the tool says so when you pick one. Estimates only, and not tax advice.