The Old Age Security (OAS) pension is one of the most important retirement benefits for Canadians. But if your retirement income is too high, you may face the OAS clawback—formally known as the OAS recovery tax.
In 2026, more retirees are being affected by this clawback as incomes rise and tax rules tighten. This guide explains how the OAS clawback works in 2026, how much OAS pays, what happens if you delay payments until 70, and the most effective strategies to reduce or avoid the recovery tax.
What Is the OAS Clawback (Recovery Tax)?
The OAS clawback is a tax that reduces or eliminates your OAS benefits if your annual income exceeds a certain threshold.
- It is based on Line 23400 of your tax return (net income before adjustments).
- In 2026, the clawback begins when income exceeds $93,454.
- For every dollar above this limit, you must repay 15 cents of your OAS.
If your income is high enough, your entire OAS benefit may be clawed back.
Calculate Your 2026 COLA Increase →OAS Clawback Thresholds in 2026
- Clawback starts: $93,454
- Full OAS eliminated:
- $151,668 for ages 65–74
- $157,490 for ages 75+
OAS Benefit Amounts in 2026
From July to September 2026, the maximum OAS monthly payments are:
- $734.95 for ages 65–74 (about $8,820 per year)
- $808.45 for ages 75+ (about $9,701 per year)
These amounts are indexed quarterly for inflation but remain subject to clawback if your income is above the threshold.
Example of OAS Clawback in 2026
Alan is 68 and receives the maximum OAS ($8,820 annually). His net income (Line 23400) in 2026 is $100,000.
- $100,000 – $93,454 = $6,546 over the threshold
- $6,546 × 15% = $981.90 clawback
Alan keeps $7,838.10 in OAS for the year. If his income rises further, the clawback increases proportionally until his benefit is fully eliminated.
What Happens if You Delay OAS Until 70?
You can delay OAS until age 70. Each month of deferral increases your benefit by 0.6%, for a maximum increase of 36% if you wait the full five years.
Delaying OAS may make sense if:
- You are in good health and expect to live into your late 80s or beyond.
- Your taxable income will be lower during the delay period.
But if you already have high income from CPP, pensions, or investments, delaying could increase your risk of paying more clawback later.
Who Is Eligible for OAS?
You may qualify for OAS if you are:
- A Canadian citizen or legal resident when your application is approved, and
- Have lived in Canada for at least 10 years after age 18.
If you live outside Canada, you must have:
- Lived in Canada for 20+ years after age 18, or
- Be covered under a social security agreement between Canada and your current country of residence.
Strategies to Reduce or Avoid the OAS Clawback
Here are proven ways to manage your taxable income and keep more of your OAS in 2026:
1. Use a TFSA for Retirement Income
Withdrawals from a Tax-Free Savings Account (TFSA) are not included in Line 23400, making them clawback-friendly.
2. Manage RRIF Withdrawals
Plan Registered Retirement Income Fund (RRIF) withdrawals carefully. Spreading conversions over several years can prevent large taxable spikes.
3. Pension Income Splitting
Couples can split up to 50% of eligible pension income, lowering the higher-earning spouse’s taxable income.
4. Choose Tax-Efficient Investments
- Capital gains: 50% taxable (more clawback-friendly).
- Eligible dividends: may increase clawback exposure due to gross-up rules.
- Interest income: fully taxable, least efficient.
5. Donate Securities Instead of Cash
Donating appreciated securities to charity avoids capital gains tax, lowers income, and supports a cause.
6. Defer Large Income Events
Selling a property or realizing big gains in one year can trigger clawback. Spreading transactions over time helps.
7. File Form T1213 for Relief
If your income dropped significantly compared to last year, you may request reduced withholdings on OAS clawback.
8. Advanced Planning Options
High-net-worth retirees may consider corporate structures or leveraged investing to manage taxable income—but these strategies require expert advice.
Key Takeaway
The OAS clawback in 2026 starts at $93,454 of net income and can reduce your Old Age Security payments to zero if you earn above $151,668 (65–74) or $157,490 (75+).
With proper tax planning—using TFSAs, income splitting, strategic RRIF withdrawals, and investment structuring—you can significantly reduce or avoid the recovery tax.
A financial advisor can help you model scenarios, project your taxable income, and build a strategy that maximizes your retirement income while minimizing clawback.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional about your individual situation.
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