OAS Clawback Threshold 2026: The Complete Guide for Canadians
The OAS clawback threshold in 2026 is $93,454. Here is what that means for your pension, how the Recovery Tax is calculated, and six legal strategies to protect your full benefit.
What Is the OAS Clawback?
The formal name is the OAS Recovery Tax, though most Canadians know it as the clawback. It is a mechanism the Canada Revenue Agency uses to recover Old Age Security benefits from higher-income retirees.
When your net income on line 23600 of your tax return exceeds the annual threshold, you must repay 15 cents of OAS for every dollar above that line. The result is that Canadians with incomes well above the threshold can lose their entire OAS benefit for the year.
One of the most important details many retirees miss is the one-year lag. The clawback you pay in 2026 is based on your 2025 net income, not your 2026 income. Service Canada reads your 2025 return and adjusts your monthly OAS payments for the July 2026 to June 2027 payment year accordingly.
The Canada Revenue Agency calls this the OAS Recovery Tax. The amount is calculated on Schedule 7 of your T1 return and reported on line 23500. “Clawback” is the informal term that appears everywhere except the official forms themselves.
The threshold is indexed to inflation each year using the Consumer Price Index. That is why the number rises slightly every July and why there are two different thresholds within a single calendar year.
The 2026 Threshold Numbers
There are two distinct thresholds in 2026 because Service Canada updates the figure every July. Your OAS payment period and the tax year used to calculate repayment are related but separate.
Payments made from January through June 2026 use the threshold set by your 2024 income tax return. Payments from July through December 2026 use the threshold set by your 2025 return. Both thresholds are shown below along with the current maximum monthly benefits.
| Period | Threshold | Income Year Used | Max OAS 65–74 | Max OAS 75+ |
|---|---|---|---|---|
| Jan–Jun 2026 | $90,997 | 2024 Return | $727.67/mo | $800.44/mo |
| Jul–Dec 2026 | $93,454 | 2025 Return | $743.05/mo | $817.36/mo |
Full elimination of OAS occurs when the recovery tax equals the total annual benefit. For recipients aged 65 to 74, the full benefit is eliminated at approximately $152,000 in net income. For recipients aged 75 and over, the higher benefit is fully eliminated at approximately $155,000.
OAS payment periods run July to June, but the calendar year runs January to December. Service Canada cannot update the threshold mid-year, so each payment year has its own threshold. Your 2025 tax filing (due April 30, 2026) determines the July 2026 to June 2027 payment adjustment.
How It Is Calculated
The formula is straightforward. It requires three pieces of information: your net income from line 23600, the applicable threshold, and the 15% recovery rate.
Net income on line 23600 is $115,000. The Jul–Dec 2026 threshold is $93,454. The excess income is $21,546. Multiply by 15% to get a recovery tax of $3,231.90. If the recipient is aged 65–74 and received the full $8,916 annual OAS, they keep $5,684.10 after the clawback.
The recovery tax is not an additional tax on top of regular income tax. It is a repayment of a government benefit, which means it reduces your taxable income by the same amount when you report it on line 23500.
Interactive Calculator
Drag the slider to your expected net income on line 23600 and select your age group. The calculator shows your estimated clawback and remaining OAS using the Jul–Dec 2026 threshold of $93,454.
What Income Counts
The clawback applies to your net income on line 23600, which is a broader figure than many retirees expect. Understanding what goes in — and what does not — is the foundation of every reduction strategy.
The following types of income are included in line 23600 and therefore count toward the clawback threshold:
- Employment and self-employment income
- RRSP and RRIF withdrawals
- CPP and QPP pension payments
- OAS benefits themselves
- Workplace pension income
- Rental income
- Interest and investment income from non-registered accounts
- Taxable capital gains (50% of realized gains)
- Eligible dividends as grossed up
- Foreign pension income
Eligible Canadian dividends are grossed up by 38% before they appear on line 23600. If you received $20,000 in eligible dividends, CRA treats $27,600 as income for clawback purposes. This catches many retirees off guard and can push them above the threshold unexpectedly. The dividend tax credit offsets some of this at the bottom of the return, but the gross-up still affects line 23600.
TFSA withdrawals do not appear anywhere on your tax return. They are completely invisible to the CRA for clawback purposes. A retiree drawing $30,000 per year from a TFSA has the same line 23600 income as if those withdrawals never happened. This is why the TFSA is the single most powerful OAS protection tool available to Canadians.
Six Strategies to Reduce It
None of these strategies require exotic planning. Each one works within the existing tax rules and can be implemented by most Canadian retirees with some advance planning.
XEQT Investors and OAS Planning
XEQT held inside a TFSA is about as close to a perfect OAS-protection structure as a Canadian retail investor can build. The combination of broad global diversification and tax-invisible growth is hard to beat in retirement.
The account priority order matters enormously for OAS-sensitive retirees. Drawing from accounts in the wrong sequence can unnecessarily inflate your line 23600 income. A sensible order for most investors is to draw from the TFSA first, then use RRIF minimums as required, and leave non-registered accounts until last.
XEQT pays a large annual distribution in December that includes capital gains realized throughout the year. In a non-registered account, this distribution appears as taxable income on your return in the year it is paid. Holding XEQT in a non-registered account near the clawback threshold means December distributions could unexpectedly push your income above $93,454. Holding XEQT inside a TFSA eliminates this problem entirely.
XEQT held inside a TFSA generates growth, distributions, and capital gains that are completely invisible to the CRA. For OAS-sensitive retirees with 10 or more years of compounding ahead, maximizing XEQT inside the TFSA is one of the most effective long-term strategies for staying below the clawback threshold throughout retirement.
How CRA Collects It
Most retirees never write a cheque for the OAS clawback. It is collected automatically through monthly OAS payment reductions, and the process is managed by Service Canada rather than the CRA directly.
After you file your income tax return, Service Canada receives information from the CRA indicating whether your income exceeded the threshold. If it did, you receive a letter in the spring from Service Canada informing you of the recovery tax amount and explaining how your monthly OAS payments will be adjusted.
The adjustment takes effect in July. Your monthly OAS payment is reduced by one-twelfth of the annual recovery tax for each month from July through June of the following year. This is why the two thresholds in 2026 relate to different payment periods rather than the calendar year.
At tax time, your T4A(OAS) slip reports the gross OAS amount you were entitled to and the recovery tax that was deducted. You report both figures on your return. Line 23500 shows the recovery tax you repaid, and this amount is then deducted from your net income, partially offsetting the tax cost.
Canadian non-residents receiving OAS are subject to a 25% withholding tax on OAS payments rather than the recovery tax system. Some countries have tax treaties with Canada that reduce this rate. Non-residents do not file Canadian income tax returns and therefore do not participate in the July-to-June adjustment cycle.
Top 10 Retirement Mistakes
These are the most common planning errors that cause Canadians to pay more OAS clawback than they need to. Each one is avoidable with the right information.
Sources
All threshold figures, benefit amounts, and tax rules in this guide are drawn from official Government of Canada and CRA sources.
Government of Canada — Old Age Security payment amounts. Current monthly maximum OAS amounts for recipients aged 65–74 and 75 and over, updated quarterly.
Canada Revenue Agency — Line 23500, social benefits repayment. How to calculate and report the OAS recovery tax on your T1 return.
Service Canada — OAS Recovery Tax. Official description of how the recovery tax is calculated and collected, including the payment adjustment cycle.
Canada Revenue Agency — Tax-Free Savings Account. Contribution room, withdrawal rules, and the treatment of TFSA withdrawals for income-tested benefits.
Canada Revenue Agency — Line 23600, net income. Complete list of income types that are included in net income for tax and benefit purposes.
Financial Consumer Agency of Canada — Pension income splitting. Eligibility rules for splitting pension income with a spouse or common-law partner.
Government of Canada — OAS eligibility and deferral rules. How deferral increases your monthly benefit and the maximum 36% increase at age 70.
iShares — XEQT Fund Facts. Portfolio composition, distribution history, and fund-level detail for the iShares Core Equity ETF Portfolio.