By Greg, March 2026
New thresholds are in effect this year — and missing them by even a few dollars can quietly shrink your monthly pension. Here’s everything you need to know.
Millions of Canadians count on Old Age Security as a cornerstone of their retirement income — but not everyone receives the full amount. If your net income climbs past a government-set threshold, the Canada Revenue Agency begins clawing back your payments through what is officially called the OAS recovery tax. In 2026, updated income limits are in force, and understanding where those lines fall could save you thousands of dollars a year.
The good news is that the threshold has moved upward again, thanks to annual inflation indexing. The frustrating reality is that many retirees stumble into clawback territory by accident — through mandatory registered retirement income fund (RRIF) withdrawals, a one-time property sale, or simply earning more than they expected in a given year. A little advance planning goes a long way.
2026 OAS RECOVERY TAX THRESHOLDS AT A GLANCE
INCOME CATEGORY
THRESHOLD
$95,323
Clawback begins (2026 income year)
~$155,000
Full clawback — ages 65–74
$93,454
Minimum threshold (July 2026–June 2027, based on 2025 income)
$152,062 / $157,923
Maximum threshold — ages 65–74 / 75+
Rate of reduction: 15 cents for every $1 of income above the minimum threshold. Maximum OAS pension for 2026: $8,907.72.
What Is the OAS Clawback?
The OAS clawback is not a separate bill you receive in the mail. It is a reduction applied directly to your monthly Old Age Security pension payment. When your net income — as reported on line 23600 of your tax return — exceeds the annual minimum recovery threshold, the government begins reducing your OAS by 15 cents for every dollar above that level. The reductions continue until your benefit reaches zero at the maximum threshold.
Officially, the CRA calls this the Old Age Security recovery tax, but most Canadians know it as the clawback. Its purpose is to redirect OAS benefits toward retirees who depend on them most, while gradually phasing out payments to higher-income seniors who are expected to have other financial resources.
Crossing the clawback line by even a small margin can cost a retiree hundreds of dollars per month — often without warning.
The recovery tax is not applied as a lump sum at the end of the year. Instead, it is deducted from future monthly OAS payments. For example, income earned in calendar year 2025 affects your OAS payments from July 2026 through June 2027. Income earned in 2026 will affect payments from July 2027 through June 2028. This one-year-and-change lag means that poor income planning in a single year can ripple forward into your monthly budget for an extended period.
The 2026 Income Limits, Precisely
Two separate periods and income bases are in play during the 2026 calendar year, which can cause confusion. Here is how to read them:
January to June 2026 (based on 2024 income)
For the first half of 2026, your OAS payments reflect your 2024 tax return. If your 2024 net income exceeded $90,997, you were subject to clawback. Full recovery applied if your income surpassed $148,451 (ages 65–74) or $154,196 (ages 75 and over).
July 2026 to June 2027 (based on 2025 income)
From July 2026 onward, the figures shift. The minimum recovery threshold rises to $93,454. Full clawback for ages 65–74 applies at $152,062, and for those 75 and older at $157,923. These numbers are set by the government based on the maximum OAS pension amount for this period.
The 2026 Income Year Itself (affects July 2027–June 2028)
If you are planning ahead, the threshold for the 2026 income year — the income you will report on your 2026 tax return next spring — is $95,323. Earning above this amount in 2026 will trigger reductions to your OAS payments starting in July 2027. The rate of recovery remains 15 cents per dollar, and the full clawback point for ages 65–74 sits at approximately $155,000.
⚑ Why Is the 75+ Threshold Higher?
Seniors aged 75 and older receive a 10% top-up on their base OAS amount, a permanent enhancement introduced by the federal government in 2022. Because the maximum OAS pension is higher for this group, it takes more income to claw the full benefit back — which is why the maximum recovery threshold is also higher for this cohort. See Benefit Blog Post Here.
How the Recovery Tax Is Calculated
The math is straightforward once you know the numbers. You pay 15% of the amount by which your net income exceeds the minimum threshold for that year.
SAMPLE CALCULATION — 2026 INCOME YEAR
Your 2026 net income $110,000
Minus: 2026 minimum threshold− $95,323
Amount subject to recovery tax $14,677
Recovery rate× 15%
Annual clawback amount $2,201.55 / year (~$183/month)
The CRA does not wait for you to pay this as a lump sum. Instead, it deducts the monthly pro-rated amount from your OAS cheque automatically, starting in July of the following year. You will receive a letter notifying you of the deduction.
What Income Counts Toward the Threshold?
The clawback is based on your net world income — meaning all worldwide income from all sources, not just Canadian pension income. The CRA uses line 23600 (net income before adjustments) of your tax return. This includes employment income, CPP and other pension payments, RRIF and RRSP withdrawals, investment income, rental income, and capital gains.
Notably, withdrawals from a Tax-Free Savings Account (TFSA) are not included. TFSA income is completely invisible to the OAS recovery tax calculation, making TFSAs one of the most powerful planning tools available to retirees. Eligible dividends, on the other hand, can be particularly hazardous: the gross-up rules for Canadian dividends increase the amount reported on line 23600, potentially triggering clawback even if the cash received was modest.
⚑ Couples: The Clawback Is Individual
Unlike some benefits, the OAS recovery tax is based solely on individual income, not household or combined income. Both spouses can each earn up to the threshold before clawback applies to either of them. This makes income-splitting strategies particularly valuable for couples where one partner earns significantly more than the other.
Use our OAS Clawback Calculator for an estimate
Who Is Most at Risk in 2026?
The clawback does not only affect the very wealthy. A number of everyday situations can push a retiree’s income above $95,323 in a single year:
- Large RRIF withdrawals. Mandatory minimum RRIF withdrawals increase as you age. For retirees with substantial registered savings, these withdrawals alone can push income past the threshold.
- Sale of investment property or capital assets.The taxable portion of a capital gain (50% in most cases) counts toward net income. Selling a rental property, a cottage, or a significant investment portfolio in a single year can create a large one-time income spike.
- Working seniors. Those who continue to earn employment or self-employment income while collecting OAS may find their combined income exceeds the limit.
- Eligible dividend income with gross-up. The 38% gross-up applied to eligible Canadian dividends inflates the amount on line 23600, sometimes causing clawback even when after-tax cash flow is moderate.
Five Strategies to Reduce or Avoid the Clawback
With careful planning, many retirees can manage their income to stay below — or closer to — the threshold. Here are the most widely used approaches:
- Maximize TFSA withdrawals first. Since TFSA withdrawals are not taxable income, they are the most clawback-friendly source of spending money. Retirees with significant TFSA balances should draw on them before touching registered accounts.
- Spread RRIF withdrawals over several years.Taking more than the mandatory minimum in a single year can be avoided. Gradually drawing down your RRIF — even beginning voluntary withdrawals before age 72 while in a lower tax bracket — helps smooth income and prevents large spikes.
- Split eligible pension income with a spouse.Couples can transfer up to 50% of eligible pension income (such as RRIF or private pension payments) to a lower-income spouse. This can reduce the higher earner’s net income below the threshold entirely.
- Time capital gains over multiple years. If you plan to sell assets, spreading the disposition across two or more tax years can prevent a single-year income spike from triggering a large clawback.
- Consider delaying OAS past age 65. Every month you delay OAS past 65 (up to age 70) increases your monthly benefit by 0.6%. If your income is high early in retirement but expected to fall later, delaying OAS can mean receiving a larger benefit during years when the clawback will not apply.
Looking Ahead: How Thresholds Are Set Each Year
The OAS clawback thresholds are indexed to inflation annually, which means they rise in tandem with the cost of living. This protects seniors from being pushed into clawback territory purely because prices and wages go up over time. The 2026 minimum threshold of $95,323 is higher than the $93,454 figure used for the July 2026–June 2027 recovery period (which was based on 2025 income), reflecting continued upward adjustment.
Beyond inflation, thresholds can shift because of policy changes — such as modifications to the base OAS pension amount or age-based enhancements. For this reason, it pays to verify the exact figures each year rather than relying on numbers from a previous cycle.
Annual inflation indexing means thresholds rise each year — but so does the income of many retirees, making consistent monitoring essential.
The Bottom Line
The OAS clawback is one of the most consequential — and most avoidable — features of Canada’s retirement income system. For 2026, the key numbers are a minimum recovery threshold of $95,323 and a 15-cents-per-dollar reduction rate up to a full clawback at approximately $155,000 for those aged 65 to 74, and $158,000 for those 75 and older.
Awareness is the first step. Knowing where the line is drawn lets you make deliberate choices about when and how to draw on different income sources — registered versus non-registered, taxable versus tax-free. For retirees with complex income sources, a qualified financial planner or tax advisor can help model different scenarios and design a withdrawal strategy that preserves as much OAS entitlement as possible.
The clawback is not always entirely avoidable, but for many Canadians, it is absolutely manageable — with the right information and a bit of advance planning.
As always thanks for reading ,
Greg
This article is for informational purposes only and does not constitute financial, tax, or legal advice. Income thresholds are subject to change by the Canada Revenue Agency. Always consult a qualified financial or tax professional regarding your personal situation. Current figures sourced from the CRA and Government of Canada publications, March 2026.
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