New OAS Clawback Rules in 2026, Key Rules to Keep in Mind

The OAS clawback rules 2026 are now fully in effect, and thousands of Canadian seniors are seeing the impact in their monthly Old Age Security deposits this summer whether they saw it coming or not. Officially called the OAS recovery tax, the clawback reduces or eliminates OAS payments for seniors whose net world income exceeds a government-set threshold $93,454 for the current July 2026–June 2027 period, based on 2025 income. Whether you’re already receiving OAS or approaching eligibility, understanding the OAS clawback rules 2026 is one of the most important things you can do to protect your retirement income. We’ll be updating this article monthly as CRA confirms new figures and thresholds.

The clawback works simply: for every dollar of net world income above the threshold, you repay 15 cents of OAS back to the CRA typically deducted directly from your monthly payment rather than billed as a lump sum. What makes the OAS clawback rules 2026 especially important right now is that the recovery period launching in July 2026 is based on your 2025 tax return, not your current 2026 financial situation meaning even a lower income this year won’t change what’s already being deducted. Below is the complete, verified breakdown of thresholds, the exact calculation method, which income sources trigger it, and five legal strategies to reduce your exposure.

OAS Clawback Rules 2026

The July 2027–June 2028 figures remain CRA estimates until finalized later in 2027, so treat them as reliable planning guidance rather than final numbers.

What Is the OAS Clawback and Why It Matters in 2026

The OAS recovery tax was introduced in 1989 to target Old Age Security toward low- and moderate-income retirees. For every dollar of net world income above the minimum threshold, you repay 15 cents of your OAS benefit the CRA deducts it from your monthly payments throughout the recovery period, which runs from July to June each year, rather than as a single lump-sum bill at tax time.

How the OAS Recovery Tax Is Calculated

1. Take your net world income from Line 23400 of your T1 tax return.
2. Subtract the applicable minimum threshold ($93,454 for the current July 2026–June 2027 period).
3. Multiply the excess amount by 15% that is your annual recovery tax, divided across 12 monthly payments.

Worked example: A senior with 2025 net income of $110,000 has $16,546 above the $93,454 threshold. At 15%, that’s approximately $2,482 in annual OAS recovery tax, or roughly $207 less per month from July 2026 through June 2027.

Second example: A senior with 2025 net income of $120,000 has $26,546 above the threshold. At 15%, that’s approximately $3,982 annually, or about $332 less per month.

Updated 2026 OAS Base Amounts (For Reference)

Because the 75+ group receives a larger base pension, a higher income is required before their OAS is fully recovered which is why the elimination threshold sits roughly $5,700 higher for that age group.

Which Income Sources Trigger the OAS Clawback?

A common misconception is that only large pensions or investment portfolios trigger the clawback. In reality, several ordinary income sources commonly push retirees over the line:

• RRSP and RRIF withdrawals mandatory minimum RRIF withdrawals starting at age 71 can push income well above the threshold
• CPP payments rising CPP amounts add directly to taxable income
• Rental income net income from investment properties counts toward world income
• Capital gains selling a rental property, business, or investment portfolio can cause a one-year income spike
• Foreign pension income the clawback applies to global net income, so foreign pensions and investments count
• Part-time employment income working past 65 can push seniors across the threshold without realizing it

The clawback applies to net income, not gross income, so eligible deductions RRSP contributions, union dues, and pension income splitting can lower your reportable amount on Line 23400 and reduce or eliminate your recovery tax exposure. Importantly, TFSA withdrawals do not count toward this calculation at all, regardless of the amount withdrawn.

Five Legal Ways to Reduce or Avoid the OAS Clawback

1. Maximize TFSA Withdrawals Over RRSP/RRIF Withdrawals

TFSA withdrawals are completely excluded from net income calculations they never appear on Line 23400. Drawing from a TFSA instead of an RRSP or RRIF can directly reduce clawback exposure dollar for dollar. Gifts, inheritances, and life insurance payouts also don’t affect your OAS.

2. Early RRSP Drawdown Before Age 71

Many Canadians leave their RRSP untouched until mandatory RRIF conversions begin at age 71 by then, minimum withdrawals can push income above the threshold for the rest of retirement. A deliberate RRSP drawdown strategy in your late 50s or 60s during lower-income years, followed by reinvesting the after-tax proceeds into a TFSA, reduces your future RRIF balance and keeps retirement income more manageable.

3. Pension Income Splitting With Your Spouse

Married or common-law couples can transfer up to 50% of eligible pension income to a lower-income spouse using the T1032 election, substantially reducing the higher-earning partner’s net income and potentially keeping it below the recovery threshold entirely. Since the clawback is calculated per individual, this can meaningfully protect one or both spouses’ OAS.

4. Defer OAS Until Age 70

Deferring OAS from age 65 to age 70 permanently increases the monthly benefit by 0.6% per month of delay up to 36% higher for life. Beyond the larger benefit, deferring can also reduce taxable income during high-earning working years, while allowing more time to draw down an RRSP before mandatory RRIF conversions begin.

5. Spread Capital Gains Across Multiple Years

A single large capital gain from selling an investment property, a business, or a substantial portfolio can spike net income into clawback territory for one full recovery year. Spreading gains across multiple tax years through installment sales or gradual portfolio rebalancing helps keep annual income below the clawback floor.

What Happens If You’re Caught by the Clawback

If the CRA determines your 2025 net income exceeded $93,454, deductions begin with your July 2026 OAS payment and continue through June 2027, resetting the following July based on your 2026 tax return. Unlike some CRA adjustments, a clawback calculation for an already-finalized recovery period generally cannot be changed retroactively even if your income drops substantially the next year which is why proactive income planning before and throughout retirement is far more valuable than reacting after payments are already reduced.

People Also Ask

What income counts toward the OAS clawback? Employment income, self-employment income, CPP/QPP, RRSP and RRIF withdrawals, pension income, rental income, taxable capital gains, and foreign pension income all count; TFSA withdrawals do not.

How much OAS clawback will I pay on $110,000 income? Approximately $2,482 annually, or about $207 less per month, for a senior with $110,000 in 2025 net income under the current $93,454 threshold.

Is the OAS clawback the same for everyone? The starting threshold ($93,454) is the same for all ages, but the full-elimination ceiling is higher for seniors 75 and over since they receive a larger base OAS pension.

Can I avoid the OAS clawback completely? Yes, if your net world income stays below $93,454; strategies like TFSA withdrawals, pension splitting, RRSP drawdown planning, and OAS deferral can help many seniors reduce or avoid it entirely.

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