Old Age Security is not income-tested in the way many people assume. Unlike the Guaranteed Income Supplement, which is designed for low-income seniors and starts clawing back almost immediately when other income is present, OAS is available to nearly every Canadian at 65 regardless of earnings — until income gets quite high. In 2026, your OAS is not reduced at all unless your net income exceeds $90,997. Only above that level does CRA begin recovering OAS payments, at 15 cents per dollar.
The practical implication: the vast majority of Canadian retirees — including those who work part-time, draw a company pension, receive CPP, or earn investment income — are nowhere near the clawback zone. You could receive the full maximum CPP payment (~$1,364/month in 2026), the full maximum OAS (~$727/month), and still have room to earn roughly $50,000 more before the clawback starts. For a household with both spouses receiving OAS, managing income below the threshold on each person’s return separately can allow substantial combined income with no clawback on either payment.
For the smaller number of retirees with high incomes — significant RRIF withdrawals, investment portfolios, consulting income, or large company pensions — the clawback is real and worth planning around. The strategies available are also real: TFSA withdrawals, pension income splitting, RRSP meltdown planning, and OAS deferral can all reduce or eliminate exposure.
2026 OAS Clawback Thresholds at a Glance
| Component | Amount |
|---|---|
| Clawback starts (net income) | ~$90,997 |
| Clawback rate | 15% of income above threshold |
| Full clawback — OAS reduced to $0 | ~$148,000–$151,000 |
| Maximum monthly OAS (age 65–74) | ~$727 |
| Maximum monthly OAS (age 75+) | ~$800 |
The threshold is indexed annually by CRA. Check CRA or your Notice of Assessment for the confirmed figure for the tax year in question.
How the Clawback Is Calculated
The math is straightforward: subtract the threshold from your net income, multiply by 15%, and the result is how much OAS you repay for the year. That repayment is spread across 12 monthly payments, reducing each month’s OAS cheque.
Formula: Clawback = (Net Income − $90,997) × 15%
Example A: Income just above the threshold
A retiree with $100,000 net income has just $9,003 above the threshold. The 15% clawback on that excess is only $1,350/year — or $112.50/month — meaning they still receive most of their OAS.
| Item | Amount |
|---|---|
| Net income | $100,000 |
| Threshold | $90,997 |
| Excess income | $9,003 |
| Annual clawback | $9,003 × 15% = $1,350 |
| Monthly OAS reduction | $112.50 |
| Monthly OAS remaining (~$727 max) | ~$614.50 |
Example B: High-income retiree
At $130,000 net income, the clawback is significant — nearly $490/month — but OAS is not fully eliminated.
| Item | Amount |
|---|---|
| Net income | $130,000 |
| Threshold | $90,997 |
| Excess income | $39,003 |
| Annual clawback | $39,003 × 15% = $5,850 |
| Monthly OAS reduction | $487.50 |
| Monthly OAS remaining | ~$239.50 |
Example C: Income well below the threshold
| Item | Amount |
|---|---|
| Net income | $75,000 |
| Clawback | None |
| OAS retained | Full amount — no action required |
This is the situation for most Canadian retirees. A couple where each partner has $75,000 net income receives full OAS for both with combined household income of $150,000.
What Counts as Net Income for OAS Clawback?
The clawback is based on line 23600 of your tax return — your net income before adjustments. Almost every income source counts toward this figure, with a few notable exceptions.
| Income type | Counts toward clawback? |
|---|---|
| Employment income | Yes |
| CPP retirement pension | Yes |
| Company or defined benefit pension | Yes |
| RRSP withdrawals | Yes |
| RRIF withdrawals | Yes |
| Investment income (interest, dividends, capital gains) | Yes |
| Self-employment income | Yes |
| Net rental income | Yes |
| TFSA withdrawals | No — not income under the Income Tax Act |
| GIS payments | No — excluded from the clawback calculation |
| Lottery windfalls (tax-exempt prizes) | No |
TFSA withdrawals are the most powerful tool available for retirees trying to stay under the clawback threshold. They provide real cash flow — money to spend or invest — without adding a single dollar to your net income for OAS purposes. If your strategy is to keep net income below $90,997, drawing cash from your TFSA rather than your RRIF in years when other income is high is the most direct lever available. See TFSA withdrawal rules for how the room replenishment works.
Note that capital gains — at the 50% inclusion rate — count toward net income on the amount included, not the gross gain. A $50,000 capital gain adds $25,000 to your net income. Timing large asset sales across tax years can therefore help spread clawback exposure.
How OAS Clawback Is Collected
CRA manages clawback repayment through your annual tax return and, where clawback is expected to be significant, through in-year withholding adjustments called the OAS Recovery Tax.
| Method | Detail |
|---|---|
| Tax return true-up | Your clawback liability is calculated when you file your return |
| In-year Recovery Tax | If CRA expects a clawback based on prior year income, they reduce monthly OAS payments proactively |
| Adjustment timing | Typically takes effect July 1 of the following year |
| Over/underpayment | Reconciled at tax filing — excess withheld is refunded, shortfall is collected |
The practical experience: if your income was high last year, CRA will send a letter in the spring and your OAS payment will drop starting in July. This surprises many retirees who don’t realize the reduction is mechanical, not a penalty. It also means that if your income was unusually high in one year (say, due to a large RRIF withdrawal or property sale) but returns to normal, your OAS payments will be reduced for the subsequent year and then restored.
Strategies to Protect Your OAS
For retirees whose income is near or above the $90,997 threshold, several planning strategies can reduce or eliminate clawback exposure.
Draw from your TFSA first. In years when other income pushes you toward the threshold, substitute TFSA withdrawals for RRIF or RRSP withdrawals. The cash flow is the same but TFSA withdrawals don’t add to net income. This is the simplest and most effective short-term strategy for most retirees with TFSA room.
Split pension income with your spouse. Pension income splitting allows you to allocate up to 50% of eligible pension income to your lower-income spouse on your tax returns. This reduces your net income and therefore your clawback exposure, while also potentially reducing the combined household tax rate. Note that pension splitting does have implications for GIS eligibility if either spouse qualifies for GIS — model both scenarios before splitting.
Plan an RRSP meltdown before age 65. The RRSP meltdown strategy involves withdrawing RRSP funds in your late 50s and early 60s — before OAS begins — at lower marginal tax rates than you would face in your 70s with large mandatory RRIF minimums. Reducing your RRSP/RRIF balance before OAS starts means smaller mandatory withdrawals when the clawback threshold matters.
Defer OAS to 70 if early retirement years are high-income. If you retire at 65 but plan to draw down RRSPs or receive consulting income for several years, deferring OAS keeps you out of the clawback window during those years while permanently increasing your monthly benefit by up to 36%.
Time capital gains across tax years. Large investment disposals can be spread across two or more years to keep annual net income below the clawback threshold. For a principal residence exemption or eligible disposition, timing is often a real option.
Use a corporate structure (for the self-employed). Retirees who continue consulting or professional work through a corporation can control when personal income is drawn, smoothing it below the threshold. This requires professional tax advice.
| Strategy | Best for | Complexity |
|---|---|---|
| TFSA withdrawals | Most retirees with TFSA room | Low |
| Pension income splitting | Couples with unequal incomes | Low–medium |
| RRSP meltdown | Pre-retirees with large RRSPs | Medium |
| OAS deferral | High-income early retirees | Low |
| Capital gains timing | Investors with large accrued gains | Medium |
| Corporate structure | Self-employed/consultants | High — needs advisor |
Should You Defer OAS?
Deferring OAS past 65 permanently increases your benefit by 0.6% for each month of deferral, for a maximum of 36% more at age 70. The break-even analysis for OAS deferral typically puts the break-even point around age 81-82 — meaning if you live past that age, deferral pays off in total lifetime dollars received.
Deferral makes the most sense in two scenarios. First, if your income between 65 and 70 is high enough to trigger the clawback anyway — in that case, you’re not giving up much by deferring, and the 36% permanent increase is worth more later. Second, if you are in good health, have other sufficient income, and expect a retirement lasting into your 80s or beyond, the higher guaranteed indexed income is valuable longevity insurance.
Deferral is generally less beneficial if you are in poor health, have limited other assets to live on between 65 and 70, or if your income at 65 is already comfortably below the clawback threshold.
See when should I apply for OAS for the detailed break-even analysis with different income scenarios.
OAS vs. GIS: Opposite Ends of the Income Spectrum
It helps to understand how OAS and GIS work in contrast. OAS is available to virtually all seniors and is only clawed back for high-income retirees. GIS is an add-on benefit available only to low-income seniors who receive OAS — it is clawed back sharply as income rises, at 50 cents per dollar on most income sources.
The two programs are designed for opposite income situations: OAS serves all seniors and penalizes only the top of the income distribution. GIS top-ups that OAS for those at the bottom. For how much you can earn on GIS before the clawback, the thresholds are much lower — around $21,000 for a single person.
| Feature | OAS | GIS |
|---|---|---|
| Who qualifies | Most seniors at 65+ | Low-income OAS recipients |
| Income tested | Yes — high income clawback | Yes — sharp low-income clawback |
| Clawback starts at | ~$90,997 net income | ~$0 of most other income |
| Clawback rate | 15% | 50% |
| Employment exemption | None | First $5,000 exempt |
| TFSA treatment | No impact | No impact |
| 2026 maximum monthly | ~$727 (65–74) / ~$800 (75+) | Up to ~$1,086 (single) |
OAS for Canadians Living Outside Canada
Canadians who retire abroad can still receive OAS if they lived in Canada for at least 20 years after age 18. However, non-resident recipients are not subject to the regular income-based clawback system — instead, CRA withholds a flat 25% non-resident withholding tax directly from OAS payments.
The effective rate can be lower under a tax treaty. Canada has treaties with over 90 countries; the US treaty, for example, typically reduces withholding on pension income to 15–25% depending on the type of payment. If you are retiring to Portugal, Spain, Mexico, or another popular destination, the applicable treaty rate may be different from 25%.
| Situation | OAS treatment |
|---|---|
| Canadian resident | Income tax at marginal rate + clawback above $90,997 |
| Non-resident, no tax treaty | 25% withholding tax on gross OAS payments |
| Non-resident, tax treaty country (e.g., US) | Often 15–25% per treaty — varies |
| Returned to Canada mid-year | Canadian resident rules apply from return date |
For some high-income retirees moving to low-tax countries, the flat 25% withholding can be better than paying Canadian marginal rates on RRSP/RRIF income plus clawback. This comparison is complex and should be reviewed with a cross-border tax advisor before emigrating.