OAS Clawback Calculator 2026 | Recovery Tax Threshold

What Is the OAS Clawback?

Old Age Security (OAS) is Canada’s universal retirement benefit, but it comes with an income test. If your net income exceeds a certain threshold, the Canada Revenue Agency (CRA) begins clawing back a portion of your OAS payments. Officially called the OAS Recovery Tax, the clawback is essentially a 15-cent reduction in OAS for every dollar of income above the threshold.

The rationale is straightforward: OAS is meant to support retirees who need it most. Once your income climbs well above the average Canadian retirement income, the government phases out the benefit entirely. For 2026, that phase-out begins at $90,997 in net income and eliminates OAS payments entirely around $148,476 for those aged 65-74.

This is not a means-tested benefit you apply for — the clawback is calculated automatically from your prior year’s tax return. If your income was high last year, CRA reduces your monthly OAS cheque starting in July of the current year. If your income drops again, the payments are restored the following July. This one-year lag is an important planning consideration because a one-time income spike — from selling a property or cashing an RRSP — can cost you a full year of reduced OAS even if your income returns to normal the next year.

For a complete overview of OAS eligibility, GIS, and deferral options, see the complete OAS guide.

2026 Clawback Thresholds at a Glance

The formula is: OAS clawback = 15% x (net income minus $90,997)

The threshold is indexed to inflation each year, so it changes slightly from year to year. The maximum monthly OAS amounts also differ based on your age — those 75 and older receive a permanent 10% top-up introduced in 2022.

How Much OAS Do You Keep?

The tables below show the annual OAS clawback and the benefit remaining at various income levels. If your income falls between two rows, you can interpolate: multiply the amount over $90,997 by 15% and subtract from the maximum OAS for your age group.

Age 65-74 (Maximum OAS: $8,732/year)

At $100,000 in net income, for example, you are $9,003 above the threshold. Multiply by 15% to get a $1,350 clawback, leaving you with $7,382 in OAS for the year — about $615 per month.

Age 75+ (Maximum OAS: $9,605/year)

Canadians 75 and older receive a higher base payment, which means it takes a slightly higher income to eliminate OAS entirely — roughly $155,027 rather than $148,476. The same 15% recovery rate applies.

Monthly Impact

Because CRA adjusts your monthly payments rather than collecting a lump sum at tax time, the clawback shows up as a smaller deposit every month starting in July. If your situation changes — say your income spikes unexpectedly — you may also face a clawback balance owing when you file. The table below translates the annual numbers into monthly figures for ages 65-74.

What Income Counts Toward the Clawback?

The clawback is based on your net income from line 23600 of your tax return — the figure after most deductions but before the age amount, pension income deduction, and other credits. This is an important nuance: it means a large RRSP deduction does not reduce the income used for the clawback calculation if the funds were already withdrawn as RRIF income.

Most taxable income sources count. The key exception is TFSA withdrawals, which are completely invisible to CRA for this purpose. This is the foundational reason why retirees with significant savings are often advised to preserve TFSA room and draw it down before tapping registered accounts.

If you are coordinating multiple income sources, this income composition is central to a well-structured retirement income plan.

The Hidden Tax Rate in the Clawback Zone

Many people focus on their marginal tax bracket and overlook the clawback entirely. But between $90,997 and $148,476, the OAS recovery tax acts like a 15-percentage-point surtax stacked on top of your regular bracket. In practical terms, earning an extra dollar in that income range can cost you federal and provincial tax plus 15 cents of OAS.

This is why financial planners sometimes call this range the “clawback zone.” It can make it advantageous to take voluntary RRSP or RRIF withdrawals before OAS starts, deliberately incurring tax at a lower rate now rather than a higher combined rate later. Understanding this interaction is critical when deciding whether and when to convert your RRSP — the RRSP to RRIF conversion guide covers that decision in detail.

Strategies to Reduce OAS Clawback

1. Draw from Your TFSA First

Because TFSA withdrawals do not count as income for any federal purpose — tax, clawback, or GIS eligibility — they are the most powerful tool to fund retirement spending without pushing income above the clawback threshold. A retiree with $200,000 in a TFSA can withdraw $20,000 per year without triggering a single dollar of clawback, while the same withdrawal from an RRSP or RRIF would reduce OAS at the 15% recovery rate.

This is not a reason to avoid RRSPs during your working years — the up-front deduction is still valuable. But it is a strong reason to be strategic about the order in which you draw down different accounts. The RRIF calculator can help you model minimum withdrawal schedules alongside TFSA drawdown to understand the income in each year of retirement.

2. Pension Income Splitting

If you and your spouse have different income levels, Canadian tax law allows you to allocate up to 50% of eligible pension income — including RRIF withdrawals, defined benefit pension payments, and annuity income from a registered plan — to the lower-income spouse. This can pull one or both spouses below the clawback threshold or significantly reduce the total clawback the household pays.

Note that CPP cannot be split through the pension income splitting election. Splitting CPP requires the formal CPP sharing arrangement through Service Canada, which is a separate process with its own application.

3. Delay OAS to Age 70

Every month you defer OAS past age 65, your payment increases by 0.6%, up to a maximum 36% increase at age 70. Delaying OAS also creates a window in your early retirement to draw down registered accounts more aggressively at a lower marginal rate. When OAS does eventually begin, you receive a larger benefit, and because the clawback is a percentage of the fixed maximum — not the enhanced amount — a higher payment also means the threshold where OAS is fully eliminated rises.

Deferral is not automatically the right choice — it depends on your health, other income sources, and whether you need the cash flow. The CPP vs OAS guide covers the deferral decision in more detail.

4. RRSP Meltdown Before OAS Begins

For Canadians who retire between 60 and 65, there is a planning window to draw down RRSP balances at a lower marginal rate before OAS and CPP begin. By taking larger RRSP withdrawals in your early sixties — filling up lower tax brackets deliberately — you reduce the RRIF balance that generates mandatory minimum income later. Smaller RRIF minimums at 65 and beyond means less income in the clawback zone.

This strategy requires careful modelling because the tax paid now must be weighed against the OAS saved over potentially decades. The RRSP to RRIF conversion guide walks through the timing considerations in detail.

5. Manage One-Time Income Spikes

Some income events are unavoidable — an inheritance, the sale of a rental property, a business buyout — but others can be timed. Spreading capital gains over two tax years rather than realizing them all in one shot can mean the difference between triggering clawback and staying under the threshold. If you are offered a severance package close to retirement, deferring receipt by even a few months into a lower-income year can preserve a full year of OAS.

The one-year CRA lag also matters here. A spike in 2025 reduces your OAS from July 2026 through June 2027, and normal payments resume in July 2027 based on your 2026 return. If a large income event is unavoidable, planning it in a year when your other income is already elevated limits the incremental damage.

6. Corporate Retained Earnings (Business Owners)

Self-employed Canadians and small business owners have an additional lever: retaining earnings inside a corporation rather than paying them out immediately as salary. Corporate retained earnings are not personal income and do not count toward the OAS clawback threshold. By drawing only the personal income needed to cover living expenses — supplemented by TFSA withdrawals — a business owner can stay below the threshold while the corporation continues to grow its investments.

This approach requires coordination with a tax accountant to ensure the deferral is efficient and does not create other issues, such as the refundable tax on passive income inside a private corporation. It works best when combined with a long-term dividend payout strategy planned around OAS and CPP start dates.

Related Pages

• Complete OAS Guide
• OAS Payment Dates
• CPP vs OAS: Which to Take First
• Retirement Income Strategies
• RRIF Calculator
• RRSP to RRIF Conversion Guide
• Retirement Calculator