OAS Recovery Tax

Old Age Security (OAS) is a universal monthly pension for Canadians 65 and older who meet residence requirements, but higher-income seniors must repay part or all of it through the OAS recovery tax, commonly called the clawback.

HOW THE CLAWBACK WORKS

For 2026, seniors must repay 15 percent of net income (line 23400, before the clawback itself) above $95,323.
The full OAS pension is repaid once net income reaches roughly $155,000 (slightly higher for those 75 and older, who receive a 10 percent higher pension).
The repayment is calculated on the return, entered on line 42200, and deducted on line 23500.
The CRA also withholds an estimate of the next year's repayment from monthly OAS payments, based on the two previous years' income. Recipients can request a reduction of this withholding with Form T1213(OAS) if income has dropped.

STRATEGIES TO REDUCE THE CLAWBACK

Pension income splitting with a lower-income spouse.
Drawing down RRSPs before 65 or 71 to smooth taxable income.
Using TFSAs, whose withdrawals do not count as income.
Deferring OAS to as late as age 70 (with a 0.6 percent increase per month) if income will be high in the early years of retirement.
Realising capital gains in years before OAS starts, or spreading them over several years.
Being mindful that grossed-up eligible dividends inflate net income by 38 percent.

EXAMPLE

A 70-year-old with $110,000 of net income in 2026 is $14,677 over the threshold and must repay 15 percent of that, about $2,200 of OAS. Splitting $15,000 of RRIF income with a spouse would bring net income below the threshold and eliminate the repayment.

NON-RESIDENTS

Non-resident OAS recipients must file an annual Old Age Security Return of Income (Form T1136) to report world income, or their pension will be suspended.

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